QInvest deal at risk on Egypt approval delay: EFG-Hermes

Bloomberg/Cairo

EFG-Hermes Holding said an agreement to create a joint venture with Qatar’s QInvest is at risk unless Egypt’s markets regulator approves the transaction before the accord expires next month.

The Cairo-based investment bank, whose co-chief executive officers are standing trial, is awaiting the Egyptian Financial Supervisory Authority after obtaining approval from regulators in various countries, EFG-Hermes said in a statement to the Egyptian Exchange yesterday. The deal would bring $300mn of foreign direct investment to Egypt, it said.

If EFG-Hermes doesn’t get the authority’s approval “in the coming days, the implementation of the partnership agreement will become difficult,” the company said. The accord was signed on May 3 last year and is valid for 12 months, it said.

QInvest, a unit of Qatar Islamic Bank, and EFG-Hermes plan to create an investment bank with operations in the Middle East, Africa and Turkey, as well as southern and southeastern Asia. The takeover would include EFG Hermes’ main investment banking, asset management and brokerage businesses, and exclude its private equity business and Credit Libanais unit. Under the terms of the proposed deal, QInvest will take 60% of the new entity and EFG-Hermes the remainder, with QInvest having the option to buy EFG- Hermes’s stake in one to three years after completion.

“This clarifies that the real problem is driven by Egypt at this stage,” said Hany Genena, head of research at Cairo- based Pharos Securities Brokerage. “It has to do with the problem of the two CEOs, so we’ll have to wait and see what happens.”

Co-CEOs, Yasser al-Mallawany and Hassan Heikal, are defendants alongside former Egyptian President Hosni Mubarak’s two sons, Alaa and Gamal, and five others on charges of unlawful gains related to the 2007 sale of El Watany Bank of Egypt. The trial began in July 2012. EFG-Hermes’ investor-relations manager, Hanzada Nessim, said last month there is “no relation” between the trial and delays to the sale.

Ashraf el-Sharkawy, chairman of the Egyptian Financial Supervisory Authority, couldn’t be reached for comment. A spokesman for QInvest in Doha declined to comment.

However, EFG-Hermes shares climbed the most in more than five weeks yesterday on speculation Egypt’s market regulator will approve the deal with QInvest before the proposal expires.

EFG-Hermes advanced 3.3% to 9.71 Egyptian pounds at the close in Cairo, the biggest jump since February 28.

“Investors are betting on an announcement by the EFSA (Egyptian Financial Supervisory Authority) before the offer expires,” Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities, said in an e- mail. “Approval will pave the way for a 4-pound dividend, which is more than 40% at the current share price.”

EFG-Hermes shares have declined 12% this year, falling more steeply than the 7.9% drop in the EGX 30.

Morgan Stanley names veteran banker Kayello as new Mena head

Morgan Stanley named veteran banker Sammy Kayello as the chief executive and chairman of its business in the Middle East and North Africa, replacing Kamal Jabre who is relocating to London for a senior investment banking role.

Kayello, who was in charge of the US investment bank’s sales and trading operations in the region, has been with the bank for over 25 years and has been based in Dubai since 2006.

A spokesman for the bank in Dubai confirmed Kayello’s appointment and Jabre’s move to London.

Jabre, a mergers and acquisitions banker who took the top Mena role in 2011, is relocating to London as the deputy head for the bank’s investment banking business in Europe, Middle East and Africa (EMEA).

Jabre will report to Franck Petitgas, global co-head of investment banking, a banking source familiar with the matter said. Mark Eichorn is the other head of the bank’s investment banking team.

“He (Jabre) is inheriting a bigger business and a wider region in the new role, so this is effectively a promotion for him,” the source said, speaking on condition of anonymity.

Morgan Stanley, the sixth-largest US bank by assets, is trimming staff at its Dubai office, mainly by cutting jobs in its equities division, as part of a global plan to reduce costs, sources told Reuters in January.

But investment banking activity in the region is showing signs of a slow revival as financial markets pick up and global companies resume expansion plans.

Mergers and acquisitions transactions targeting Middle Eastern firms amounted to $20bn in 2012, double the activity in 2011, according to Thomson Reuters data.