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Tuesday, 31 August 2021

CBE OKs acquisition of 76% of AIB by EFG and SFE

CBE gives final thumbs up to Arab Investment Bank acquisition: EFG Hermes and the Sovereign Fund of Egypt (SFE) have gotten the final go-ahead from the central bank to purchase a 76% stake in the Arab Investment Bank, EFG said in a regulatory filing (pdf) yesterday. The two institutions will acquire the shares via a EGP 3.8 bn capital increase, giving EFG a 51% stake and the SFE 25%.

Who’s the seller? The National Investment Bank (NIB), which currently holds a 91.4% stake in the bank, will reduce its ownership to 24%, while minority shareholders with the remaining 8.6% will offload their stakes. EFG Hermes will subscribe to 423 mn newly-issued shares for EGP 6.03 per share, at a total value of EGP 2.55 bn. Meanwhile, the SFE will acquire 207 mn newly issued shares at the same per-share price totalling EGP 1.25 bn.

The transaction is expected to close before the end of the current quarter, EFG and SFE said earlier this year.

The acquisition marks Egypt’s first full bank privatization in 15 years — and the fact that the SFE has managed to pull it off helps prove that it’s serious about public-private partnership. The last time Egypt saw this kind of a sale was in 2006, when Bank of Alexandria was sold to Italy’s Intesa Sanpaolo. Government privatization schemes stall regularly, with a central bank plan to sell off United Bank apparently on hold for now. That makes the acquisition even better news for the SFE — as one Goldman Sachs analyst told Reuters back in May, 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].”

It’s been a long road: EFG and the SFE began due diligence on AIB in June 2020, after receiving clearance from the CBE. The transaction has been through several rounds of approvals, getting the green light from EFG Hermes’ board in April, from the cabinet in May, and now finally from the central bank.

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