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Wednesday, 16 September 2020

EFG Hermes, Egypt’s sovereign fund to finalize AIB takeover this year

M&A WATCH- EFG Hermes, SFE to finalize AIB acquisition this year: EFG Hermes and the Sovereign Fund of Egypt (SFE) expect to close their acquisition of a 76% stake in state-affiliated Arab Investment Bank (AIB) before the end of 2020 through a capital increase to EGP 5 bn, SFE CEO Ayman Soliman told Al Mal. The SFE will acquire its stake through its newly-established, EGP 30 bn financial services sub-fund, Soliman said. AIB’s paid-in capital last stood at EGP 1.84 bn in May. Issuing new shares would help the bank meet the new capital requirements mandated by the newly-passed Banking and Central Bank Act, Soliman said. AIB is both a commercial and investment bank and offers traditional and sharia-compliant services.

Background: The acquisition will see EFG take a 51% stake and the SFE up to 25%, the two investors said in June. EFG and the SFE could also acquire shares from state-owned National Investment Bank (NIB), which presently holds 91.4% of AIB, with the remaining 8.6% held directly by the Federation of Arab Republics. NIB had announced a plan earlier this year to take several other of its portfolio companies to market with the help of the SFE.

SFE wants healthcare providers to start looking beyond Cairo: The SFE is involved in separate talks with leading healthcare players to partner on adding hospital beds outside Cairo, Soliman said. This would improve access to surgery for residents of other cities and promote competition on pricing, he said. The SFE will nudge things in that direction by offering land to some projects through its healthcare sub-fund. The fund recently set up a JV in partnership Concord International Investments, the SEC-regulated firm set up by Mohamed Younes and Prince Abbas Hilmi.

Plenty of room for private sector in the SFE’s health fund: The SFE will soon be on the lookout for more limited partners to sign up as financial or strategic investors in the healthcare sub-fund, Soliman said yesterday, adding that the sovereign fund will only contribute a small part of the capital. This gives the private sector plenty of room to participate, and is in line with the SFE’s mandate to encourage private participation in development projects. Once it formally launches, the sub-fund will primarily target supporting and expanding both public and private healthcare infrastructure projects. The SFE announced earlier this month that it plans to formally launch two more sub-funds besides the healthcare and fintech vehicles: one covering tourism and real estate and another infrastructure.

Plan to increase agricultural efficiency: The SFE’s financial services sub-fund is also currently studying another plan that will see it partner with the Agricultural Bank of Egypt (ABE) to offer fintech solutions to farmers. The sub-fund will be working with the ABE to encourage unbanked farmers to use a fintech platform that will most likely be built through mobile apps, Soliman said. The aim is to give the farmers access to financial services, and encourage them to purchase modern irrigation equipment, he said without giving further details.

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