EFG-Hermes Says QInvest Deal at Risk on Egypt Approval Delay

EFG-Hermes Holding SAE said an agreement to create a joint venture with Qatar’s QInvest LLC is at risk unless Egypt’s markets regulator approves the transaction before the accord is set to expire next month.

The Cairo-based investment bank, whose co-chief executive officers are standing trial, is awaiting the Egyptian Financial Supervisory Authority after obtaining approval from regulators in various countries, EFG-Hermes said in a statement to the Egyptian Exchange yesterday. The deal would bring $300 million of foreign direct investment to Egypt, according to the bank.

QInvest, a unit of Qatar Islamic Bank, and EFG-Hermes plan to create an investment bank with operations in the Middle East, Africa and Turkey, as well as southern and southeastern Asia. The transaction would include EFG Hermes’ main investment banking, asset management and brokerage businesses, and exclude its private equity business and Credit Libanais SAL unit.

If EFG-Hermes doesn’t get the authority’s approval “in the coming days, the implementation of the partnership agreement will become difficult,” the company said. The accord was signed May 3 and is valid for 12 months, it said.

“This clarifies that the real problem is driven by Egypt at this stage,” said Hany Genena, head of research at Cairo-based Pharos Securities Brokerage. “It has to do with the problem of the two CEOs, so we’ll have to wait and see what happens.”

CEOs on Trial

Co-CEOs, Yasser Al Mallawany and Hassan Heikal, are defendants alongside former Egyptian President Hosni Mubarak’s two sons, Alaa and Gamal, and five others on charges of illicit gains related to the 2007 sale of El Watany Bank of Egypt. The trial began in July 2012. EFG-Hermes’ investor-relations manager, Hanzada Nessim, said last month there is “no relation” between the trial and delays to the sale.

EFG-Hermes’ stock declined 0.1 percent to 9.7 pounds at 11:17 a.m. in Cairo. They gained 3.3 percent yesterday.

“Investors are betting on an announcement by EFSA before the offer expires,” said Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities. “EFSA’s approval will pave the way for a 4 pound dividend, which is more than 40 percent at current share price.”

Ashraf El Sharkawy, chairman of the Egyptian Financial Supervisory Authority, couldn’t be reached for comment. A spokesman for QInvest in Doha, who asked not to be named under corporate policy, declined to comment.

To contact the reporter on this story: Nadine Marroushi in Cairo at nmarroushi@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net or Claudia Maedler at cmaedler@bloomberg.net;

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