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Thursday, 23 February 2023

Valuation dispute puts Saudi United Bank acquisition at risk

Saudi wealth fund takeover of United Bank in jeopardy? The Public Investment Fund (PIF) has reportedly hit ‘pause’ on talks for the acquisition of state-owned United Bank due to a dispute over its valuation, Bloomberg and Reuters reported yesterday, citing sources they claim are familiar with the matter. The two sides have reportedly not been able to agree on how to value the bank following the devaluation of the EGP, which has lost almost half its value over the past year.

The sticking point: The PIF wants to agree on a valuation in local-currency terms, with the USD amount payable determined at the time of the transaction according to the exchange rate at the time of execution. The Central Bank of Egypt, which owns 99.9% of the bank, is arguing for a USD-based valuation from the beginning, the newswires report.

REMEMBER- The PIF opened talks to purchase United Bank last year. Bloomberg reported in December that the wealth fund could acquire the lender for USD 600 mn.

Lining up an alternative buyer? House Planning Committee Chair Fakhri El Fiqi told local media last week that Saudi lenders Riyad Bank and Al Rajhi Bank are interested in acquiring shares in United Bank. The bank is among a line-up of 32 companies that the state plans to sell stakes in as part of a rebooted privatization program announced earlier this month.

KSA has pledged to invest bns of USD in Egypt: The transaction is part of a USD 10 bn investment pledge by the Saudis, which last year joined the UAE and Qatar in offering bns of USD to Egypt to help stabilize its economy following the war in Ukraine.

This isn’t the first sticking point in ongoing acquisition talks: Talks with Qatar over several acquisitions have reportedly hit stumbling blocks in recent weeks due to the government’s reluctance to sell down sizable stakes in the companies. The Qatari wealth fund is looking to acquire Telecom Egypt’s entire 45% stake in Vodafone Egypt and majority ownership in two container terminal operators — stakes that the government is reportedly unwilling to hand over.

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