The stock market is awaiting a decision by investment bank EFG Hermes shareholders next Sunday regarding a tender offer to buy 20 per cent of the bank. The offer is being submitted by a consortium of Egypt investment funds indirectly owned by telecoms heavyweight Naguib Sawiris together with Beltone Financial and its sister company Beltone Capital Holding. The value of the offer is LE16 per share, putting the total value of the deal at LE1.835 billion. “It is hard to know if the shareholders will accept the offer or not,” said Hani Genena, head of research at Pharos Securities, pointing to the controversy surrounding the pricing of the shares. While the Egyptian Financial Supervisory Authority (EFSA) approved the offer submitted by the Sawiris-Beltone alliance on 18 June, EFG-Hermes announced last Saturday that its share price evaluation conducted by HC Securities and Investment had put the fair value at LE22.93, or 30 per cent higher than the offered price. HC Securities and Investment was selected by EFG-Hermes as the independent financial advisor (IFA) to conduct an evaluation of the deal. “Despite having no legal obligation to appoint an IFA, the board of directors opted to do so in affirmation of its commitment to safeguard the rights and interests of all shareholders and in accordance with its commitment to transparency and integrity,” noted an EFG-Hermes statement released three weeks ago. In reaction, the alliance announced that they had “no intention of changing the offer price for the shares,” in a joint statement. Amr Al-Alfi, Head of Research at Mubasher Securities and Investment, said that the HC evaluation “might have negative effects on the deal's success, as shareholders will keep their holdings hoping they might get a higher offer in the future.” However, he added that shareholders might see the difference in valuation as the outcome of applying different evaluation methods. Pharos valued the shares at LE21 six months ago, but lowered its assessment on the back of the Sawiris offer. Meanwhile Goldman Sachs put the fair value recently at LE17. While HC has a reputation as a reliable investment bank, Genena said that the fact that it was a competitor of EFG and Beltone might make some shareholders doubt the fairness of its valuation of a deal that could negatively affect its market position if it was passed. He noted that the market had ignored HC's fair value and the shares had not exceeded the LE16 threshold, meaning that shareholders were not convinced that the shares were undervalued. “Moreover, a lot of shareholders would prefer it if Sawiris joined the group to make use of his relations and experience,” Genena added. The Sawiris-Beltone alliance surprised the market and EFG with the offer one month ago. Although the New Egypt Investment Fund has offered to buy the majority of the sought-after stake, 18 per cent of EFG, it was Beltone that announced the deal as it is a listed company that has to reveal any changes that might occur in its ownership or holdings. Shares of both EFG and Beltone rose after the announcement, with Beltone gaining 9.9 per cent and EFG 6.8 per cent. EFG-Hermes is one of the Middle East's biggest investment banks, with operations in Egypt, Saudi Arabia, the United Arab Emirates, Kuwait, Jordan, Lebanon, Oman and Qatar. The government of Dubai owned 11 per cent of EFG-Hermes as of the end of March, making it the biggest shareholder. EFG has a free float of about 67 per cent. It registered profits in the first quarter of the current year of around LE120 million. In 2012, EFG-Hermes agreed on a deal with Qatar's QInvest to spin off parts of its assets to create an investment bank with operations spanning the Middle East, Africa and Turkey. But the deal fell through, as did another previous Sawiris-backed offer.
