Abu Dhabi's FAB offers to buy majority stake in Egypt's EFG Hermes

First Abu Dhabi Bank plans to buy a stake of no less than 51% in Egypt's largest investment bank

The board of EFG Hermes investment bank is considering the offer from First Abu Dhabi Bank. Reuters

First Abu Dhabi Bank, the top lender in the UAE by assets, made a non-binding offer to buy a majority stake in Egypt's largest investment bank EFG Hermes.

FAB, as the Abu Dhabi bank is known, made an offer for a potential cash acquisition of a majority stake not less than 51 per cent of the company’s issued share capital with an estimated purchase price of 19 pounds ($1.21) per share, valuing EFG Hermes at 18.5 billion pounds, both entities said in regulatory filings on Wednesday.

“Completion of the transaction and setting the final price is conditional on the completion of the due diligence examination process and obtaining approvals in accordance with regulatory requirements,” EFG Hermes said.

The EFG Hermes board is currently studying the offer, and the company will disclose further development, it said. FAB did not immediately respond to a request for comment.

FAB’s offer price is a premium of about 21 per cent to EFG Hermes' share price before its shares were suspended from trading on Wednesday. Its share value has bounced back almost 40 per cent since last year’s low in August, data compiled by Bloomberg shows.

FAB said its offer "represents an attractive liquidity event and a compelling value proposition for EFG Hermes’ shareholders, reflecting the company’s robust fundamentals, and strong future growth prospects".

"This potential transaction would represent a significant milestone for FAB, in line with the bank’s long-term strategic ambitions to become the reference institution for investment banking in the region," FAB said in a statement. "It provides enhanced scale, specialisation, growth levers and revenue synergies, strengthening FAB’s offering and regional presence. This potential transaction will build on EFG Hermes’ strong investment banking capabilities, track record and reputable brand."

The success of the proposed transaction will mark FAB’s second acquisition in the Arab world’s most populous nation and the region's third largest economy. FAB agreed to buy Bank Audi Egypt in January 2021 and received regulatory approval in April for the deal. It began integrating the Lebanese bank's operations in May and said it expects to complete the process by 2022.

The Bank Audi deal completed for an undisclosed sum is expected to significantly increase FAB's footprint in Egypt and control over EFG Hermes will boost its market presence.

The fast-growing Egyptian market is attractive for property companies, investment houses and banks that have ample liquidity as oil prices rise. Last year, Emirates NBD, Dubai's biggest bank, opened negotiations to buy Blom Egypt operations. A consortium of Aldar Properties and one of the region’s biggest holding companies, ADQ, acquired a majority stake in Egypt’s Sixth of October for Development and Investment Company for 6.1bn Egyptian pounds in the fourth quarter of last year.

Banks in the UAE are increasingly looking to expand their international footprint amid continued economic recovery in the market. In November, FAB said it will expand its international network with the opening of its first branch in China.

The EFG Hermes deal will boost its investment banking capabilities outside the UAE as the Egyptian bank is an active participant of major equity capital market and mergers and acquisition deals in the broader Mena region and beyond.

EFG Hermes serves frontier and emerging markets and its footprint spans 13 countries including Jordan, the UAE, Saudi Arabia, the UK, Bangladesh and Nigeria. With operational history of more than three decades, the lender offers research and wealth management services. In select markets, it also offers leasing, consumer finance and micro finance, services, its website says.

The Egyptian bank acquired a majority stake in Arab Investment Bank in November.