Nov. 8 (Bloomberg) -- Pioneers Holding agreed to buy rival Egyptian securities firm Beltone Financial in a share swap, gaining asset-management expertise as it aims to create the Middle East’s biggest investment bank.

Pioneers today said it will issue 100 million shares to Beltone’s owners, who will have about 17 percent of the companies’ combined capital. The premium for those new shares hasn’t yet been determined, Beltone said.

Shares of Pioneers jumped 7.9 percent on optimism the deal will give the nation’s second-largest securities firm greater access to investors outside Egypt as the Arab world’s markets recover. Both companies declined to estimate a value for the offer, though 100 million Pioneers shares would be valued at 721 million Egyptian pounds ($131.8 million) at the current price.

“Pioneers will benefit from Beltone in the strong institutional and foreign clientele that they lack, and Beltone will benefit from the strong retail side at Pioneers’ brokerage,” said Walaa Hazem, vice president for asset management at Cairo-based HC Securities & Investment Co. “In asset management, Beltone has a good platform, especially in fixed income,” Hazem said.

Pioneers has 30 offices in Egypt, Saudi Arabia, the United Arab Emirates, Syria and Bahrain. Beltone, which is privately held, says it has 26 billion Egyptian pounds of assets under management. According to its October report, Beltone concluded 34 investment-banking deals valued at 42.6 billion Egyptian pounds over the past five years.

The deal aims to create the biggest investment bank in the Middle East and North Africa in terms of “assets under management, presence and network distribution,” Osama Rashad, head of investor relations at Beltone Financial, said by phone.

CEOs Retain Posts

Rashad said that Pioneers and Beltone will retain separate management structures, and the deal excludes Beltone Private Equity, which isn’t owned by Beltone Financial. He said Walid Zaki will remain Pioneers’ chief executive officer, while Beltone CEO Aladdin Saba, who owns a stake in the company, will also retain his post.

Both executives will report to a new board of directors whose composition hasn’t yet been determined, Rashad said. Rashad declined to give more details of Beltone’s ownership.

Both companies compete with EFG-Hermes Holding SAE, Egypt’s biggest publicly traded securities firm, whose market value of 12 billion Egyptian pounds is more than three times as large as that of Pioneers. Pioneer’s shares have added 11 percent this year, trailing the 80 percent surge by EFG-Hermes.

EFG-Hermes’ revenue for 2008 was 2.2 billion Egyptian pounds, compared with 387.5 million pounds for Pioneers. Rashad said Beltone’s 2008 revenue was 180.2 million Egyptian pounds.

‘Critical Mass’

Pioneers’ services include investment management and fund administration. It became a public company after selling stock in 2008 to fund expansion. It has had several failed attempts to expand this year, cancelling a bid for a Moroccan firm and having its offer for Standard Securities Co. rejected.

The combined bank will have “big critical mass, with all the tools for it to become the port of call” for investors in the region, Beltone Chairman Aly El-Tahry said by phone from Cairo, where both companies are based. The deal is subject to regulatory approval and due diligence.

Shares of Pioneers rose 53 piasters, or 7.9 percent, to 7.21 Egyptian pounds in Cairo. That was the steepest gain since April 13. Egypt’s benchmark EGX30 stock index is the best performer among Arab equity indexes tracked by Bloomberg News this year, gaining 45 percent.

To contact the reporter on this story: Alaa Shahine in Cairo at asalha@bloomberg.net

Last Updated: November 8, 2009 10:24 EST