EFG-Hermes Takeover Mired in Delays as May Deadline Nears

The takeover of EFG-Hermes Holding SAE, Egypt’s biggest investment bank, by Qatar’s QInvest LLC is mired in delays almost a year after the transaction was agreed.

The deal is set to expire on May 4 unless it receives a so-called no objection from Egypt’s regulator on the transfer of its assets to Qatar, Hanzada Nessim, investor-relations manager at Cairo-based EFG-Hermes, said yesterday by telephone. The regulator hasn’t given a date for a decision.

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 takeover would include EFG’s main investment banking, asset management and brokerage businesses, and exclude its private equity business and Credit Libanais SAL unit.

EFG-Hermes’s co-chief executives, Yasser Al Mallawany and Hassan Heikal, are also defendants alongside former Egyptian president Hosni Mubarak’s two sons, Alaa and Gamal Mubarak, 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.

A QInvest spokesman, who asked not to be identified citing corporate policy, declined to comment.

Not Clear

“I don’t think the deal will go through before the lawsuit is finalized,” Hany Genena, head of research at Cairo-based Pharos Securities Brokerage, said yesterday by telephone. “It is not clear when the lawsuit will end.”

The terms of the deal include a four Egyptian pound per share dividend once it is completed.

EFG-Hermes fell as much as 2.7 percent and traded at 10.05 pounds as of 2:19 p.m., after declining 1.3 percent yesterday. The stock has declined 8.6 percent this year, compared with a 5.7 percent drop for the benchmark EGX 30 Index.

QInvest has cut jobs at its brokerage and asset management divisions ahead of the transaction, two people familiar with the matter said in October. Under the terms of the proposed deal, QInvest will take 60 percent of the new entity and EFG-Hermes the remainder, with QInvest having the option to buy EFG-Hermes’s stake in one to three years after completion.

Still, Beltone Financial, which has a buy rating on EFG-Hermes, said in an e-mailed note to investors today that both parties remain committed to the deal even amid delays, reiterating its positive outlook on the shares. Beltone has a price estimate of 15.58 Egyptian pounds on EFG, implying a 52 percent gain from yesterday’s closing price of 10.28 pounds.

The investment bank would be the largest in “the Arab World, Africa, Turkey, South and South East Asia,” EFG-Hermes said in April.

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