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Thursday, 20 May 2021

EFG Hermes set to transform into universal bank as SFE proves it’s serious about public-private partnership

EFG + SFE’s acquisition of AIB gets Cabinet nod: EFG Hermes and the Sovereign Fund of Egypt’s (SFE) acquisition of a combined 76% stake in the Arab Investment Bank (AIB) earned Cabinet approval yesterday, according to a Cabinet statement, bringing us one step closer to Egypt’s first bank privatization in over a decade. The acquisition — which will see the SFE and EFG purchase AIB through a capital increase — will raise AIB’s capital to EGP 5 bn, the statement says.

Who’s getting what: Once the sale closes, EFG will become AIB’s controlling shareholder with a 51% stake, while the SFE will take 25% through its financial services and digital transformation sub-fund. The state-owned National Investment Bank will retain a 24% stake of AIB post-transaction, having previously held a 91.4% stake.

What still needs to be done: The transaction requires approval from regulatory bodies — chief among them the Central Bank of Egypt (CBE) — before being finalized, the statement notes. EFG Hermes’ board of directors approved the acquisition and a fair value assessment last month.

The progress on the acquisition is getting good press, with Goldman Sachs economist Farouk Soussa telling Reuters that it “signals an improved capacity by the government to follow through on privatisation plans after a patchy track record, which is largely down to the establishment of the [SFE].”

For context, the last full bank privatization in Egypt was the sale of Bank of Alexandria to Italy’s Intesa Sanpaolo in 2006. Earlier that same year, the Egyptian American Bank — which was partially owned by Bank of Alexandria — was sold to Credit Agricole and El Mansour & El Maghraby Investment and Development Co. The CBE has also been working to sell United Bank to a strategic investor, but that process appears to have been put on hold due to covid-19.

Background: EFG and the SFE began due diligence on AIB last June, after receiving clearance from the CBE. The National Investment Bank — AIB’s parent company — had announced earlier last year a plan to take several of its portfolio companies to market with the help of the SFE.

OTHER M&A NEWS- Melinda French Gates now holds a direct 5.6% stake in Orascom Construction, after acquiring Cascade Investment Group’s entire stake, according to a regulatory disclosure (pdf). Cascade Investment is owned by Bill Gates. French Gates separately holds an 0.2% indirect stake in OC through the Bill and Melinda Gates Foundation Trust.

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