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Sunday, 15 May 2022

Amazon invests in EFG Hermes; could swap for >4% stake in valU at current USD 235 mn valuation

Amazon snaps up EFG GDRs, with option to swap for valU shares: Amazon has agreed to purchase USD 10 mn worth of EFG Hermes’ London-listed global depositary receipts (GDRs) with an option to convert the investment into an equity stake in EFG’s consumer finance arm valU, the bank said in a statement (pdf) Thursday. The transaction represents about 1% of EFG’s GDRs, which have a current market cap of USD 976 mn.

The transaction values pioneering BNPL player valU at USD 235 mn: The GDRs would translate into a 4.255% stake in valU’s issued share capital, based on valU’s current post-money USD 235 mn valuation. Amazon can decide to swap its GDRs for the valU stake if a third-party investor invests in valU, or if valU is sold, IPOed, or otherwise listed, the statement says.

valU will now offer its financing services to customers of Amazon Egypt under a separate agreement struck by the two companies, the statement says. valU will make some of its consumer financing products available to eligible customers on amazon.eg, providing these customers the option to split the total cost of purchases into multiple payments by using valU,” the statement reads.

This is an endorsement for EFG, which launched valU in late 2017 (pdf) as part of Group CEO Karim Awad’s drive to transform the firm from a leading investment bank into a financial services powerhouse operating across frontier emerging markets. A pioneer in a BNPL sector that at the time didn’t really have a name, valU has since become ubiquitous in Egypt and is eyeing regional expansion, with Saudi Arabia likely to be its first new market. We spoke with Awad about valU and the firm’s transformation in Making It, our seasonal podcast about how to build a great business here in Egypt (listen, runtime: 34:07).

The investment is also a boost for Egypt, signaling that the world’s highest-profile retailer sees lots of room to grow in the Arab world’s largest consumer market.

ADVISORS- Sharkawy Law Firm advised Amazon on the transaction, according to an emailed statement.

CORRECTION: This story was corrected at 8:02am on Sunday, 15 May 2022 to reflect that Amazon’s purchase represents 1% of EFG Hermes’ GDRs, not 10% of market cap as we incorrectly noted in the email edition of EnterpriseAM thanks to a combination of poor writing and bad math. We apologize to our readers. 

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