DUBAI: Egypt's EFG-Hermes said on Tuesday it was planning a "special situations fund worth some $500 million to take advantage of low equities prices amid the global financial turmoil. Hazem Shawki, a managing partner, also told Reuters Middle East Investment Summit that the investment bank would revisit merger plans with Lebanon's Bank Audi once markets stabilize and planned to expand in North Africa. Egypt's largest investment bank by market value, EFG-Hermes was looking to set up a fund to take advantage of undervalued equities over the next six to nine months, Shawki said, but plans were still in the early stages. "It would be something that would take advantage of the dislocation between fundamental value and the prices we see in the market. We would want to play more of a catalyst role, help to enhance value, Shawki said. "I would term it a special situations fund. Stock markets have plummeted around the world in recent weeks, hitting the market prices of listed blue chip firms and presenting what many executives from the oil-exporting Gulf Arab region have described as opportunities for bargains. But market volatility has also injected new caution into a region where companies had been expanding rapidly. EFG-Hermes and Bank Audi, one of Lebanon's top two banks, said on Monday they had broken off merger talks due to unfavorable conditions. Shawki said EFG-Hermes, which owns around 23 percent of Audi, would continue to collaborate with the Lebanese lender because it complements it business. "The Audi deal didn't go through in this market environment because the merger regime is non-existent. ... Doing a cross-border merger in this kind of market environment with this kind of volatility; it wasn't an environment that was most conducive to getting people to break new ground, Shawki said. "It was parked for the time being ... It will be revisited at some point in the future when the environment changes. EFG-Hermes, active in seven countries in the region, was also eyeing expansion into North Africa and was already in talks about establishing a presence in Algeria, Sudan and Libya though it was too early to talk about licenses or start dates, he said. "We had as a priority a footprint across the Gulf, which we've done, Shawki said. "We want similar presence in North Africa... Today they don't have large capital markets but those will come on the heel of corporate activities ... We're actively in dialogue and discussions. This is likely to be more of a green field operation rather than an acquisition. EFG-Hermes' existing tie-up with Bank Audi, which is a commercial lender, its relatively comfortable cash position and its lack of exposure to toxic debts in the West, had helped cushion it from the worst effects of the credit crunch, he said. Shawki declined to give a concrete earnings forecast for the rest of 2008, but said EFG-Hermes should do relatively well. "They (results) will look well compared to what everyone else is doing, he said. -Additional reporting by John Irish, Jason Benham and Thomas Atkins.
