EFG-Hermes Says Tapping Demand for Gulf Arab Banking Deals

EFG-Hermes Holding SAE, the biggest publicly-traded Arab investment bank, said it’s working on an “extensive pipeline” of deals in the oil-rich Gulf Cooperation Council as financial markets recover.

Mandates include helping Abu Dhabi-based companies seeking to raise funds or offer exits to investors through private placements, Seif Fikry, chief executive office for the lower GCC, which excludes Saudi Arabia, said in an interview. Other potential deals include mergers in the region, he said from Dubai, declining to provide the names of companies.

“We have quite an extensive pipeline,” he said. “People started realizing that valuations are not as bad as they used to be, and people who have bought assets at much higher levels are happy to feel that things are picking up. This is the primary phase of an economic recovery.”

Equity markets in the U.A.E. have jumped this year as growth in the second-biggest Arab economy gathers momentum, propelled by tourism and higher-than-anticipated oil production. Dubai’s benchmark DFM General Index has surged 74 percent, while Abu Dhabi’s gauge climbed 45 percent. Stock markets in the U.A.E. and Qatar were upgraded this year to emerging-market status by index provider MSCI Inc.

Shares Declined

Shares of EFG-Hermes, whose planned merger with Qatari investment bank QInvest LLC collapsed this year, fell 1.1 percent to 8.22 Egyptian pounds at 12:20 p.m. in Cairo, valuing the company at 4.72 billion Egyptian pounds ($685 million.)

EFG-Hermes, founded in Egypt in 1984, advised government-controlled Dubai Group LLC on the $164 million sale of unit Dubai First to Abu Dhabi-based First Gulf Bank, a transaction that was completed last week. The investment bank is advising Al-Futtaim Group, a U.A.E. family-owned business, on a $90 million acquisition of CMC in Kenya.

Potential equity private placements involve Abu Dhabi-based companies in industries such as oil and gas, property, construction and agribusiness, Fikry said. The investment bank said in May it was picked by private equity firm Abraaj Group to advise on the sale of its controlling stake in supermarket chain Spinneys. It also worked on the listing of BLME Holdings PLC on Nasdaq Dubai.

For 2014 “I think you will see more IPOs on Nasdaq Dubai,” Fikry said. “And definitely more M&As.”

‘Enough Capacity’

Economists at banks from HSBC Holdings Plc to Emirates NBD PJSC are upgrading their forecasts for U.A.E. economic growth this year. Gross domestic product may expand 4.4 percent, Dubai-based Emirates NBD said last month, revising an earlier estimate of 3.8 percent.

The business pipeline “is not only U.A.E-focused,” Fikry said. “We have business in Kuwait and Qatar.” He said the possible merger agreements were “mainly intra-GCC, but then when you have an M&A you never know where you land.”

The increased business activity, though, doesn’t justify hiring more people, he said. EFG-Hermes said in September that it had undergone further employee reductions as part of a plan to cut costs after the QInvest deal fell through.