Wednesday, Aug 18, 2010
(This story was originally published Tuesday.)
By Nour Malas
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Less than a year after it sold its stake in Lebanon's biggest lender Banque Audi (AUDI.LE), Egypt's EFG Hermes (HRHO.CI) said Tuesday it pay $542 million for 65% of Beirut-based bank Credit Libanais.
Under the agreement, EFG will also have a call option to buy an additional 25% interest in privately-owned Credit Libanais over the next two years, on the same terms and pricing as the initial deal, EFG said in an emailed statement.
"The acquisition will be financed from EFG Hermes' own cash resources and will not require any external funding," it added.
Chairwoman Mona Zulficar said the deal "will transform EFG Hermes and facilitate the expedient roll-out of our regional commercial banking strategy."
Analysts said the buy fits well with EFG's ambitions to expand regionally, and as a return to Lebanon after disposing its stake in Bank Audi earlier this year.
"The intention of EFG-Hermes has remained the same since a couple of years back, and that's not to acquire a Lebanese commercial bank per say but to create a universal banking model," said Ghida Obeid, a banking analyst at Dubai-based Shuaa Capital.
The acquisition will also be positive for the bank's earnings, Obeid said. "With volatile markets such as these and 1Q fee income being hampered by the adverse market conditions, having such a fixed revenue line will assist in stabilizing net profit and operating income," she said.
EXPANSION
EFG said the acquisition will give it a significant footprint in Lebanon with "further expansion potential in the Levant area."
Credit Libanais--whose management team will remain after the acquisition--has the third largest distribution network in Lebanon and an overall market share of about 5%, EFG said. It has branches in Cyprus and Bahrain, a subsidiary bank in Senegal, and a representative office in Canada.
Credit Libanais is 79% owned by Capital Investment Holding, a Bahrain-based business consultancy firm, according to Zawya.com
EFG has a brokerage license in Lebanon which it hasn't used but it is interested in re-activating it, the Cairo-based company said in its second quarter earnings statement Sunday.
In January, EFG sold its 21.95% stake in Banque Audi SAL--purchased in 2006--for $913 million, resulting in a gain of $260 million. EFG was the bank's second largest shareholder, and the two banks were in discussions to combine businesses. EFG said at the time "it became evident after the events of 2008 that an amalgamation in the near future would be difficult."
Shuaa's Obeid said Tuesday that EFG's intention "was not to sell Banque Audi, but they did when the negotiations reached a halt as they wanted to increase their stake to a major stake."
After selling its holding in Banque Audi, EFG said a number of opportunities could make strategic sense in the foreseeable future.
"One of the concerns that has been always nagging investors about EFG was deploying its cash," said Mohamed Radwan, head of foreign sales at Pharos Holding for Financial Investments.
"I think this is a time where companies with the luxury of cash can easily hunt for investment opportunities, whereby it will deliver generous returns in the future," he added.
EFG Hermes shares finished trading Tuesday 2% higher at EGP28.01 in a broadly positive Egyptian market.
-By Nour Malas, Dow Jones Newswires; +971 50 2890223, nour.malas@dowjones.com
Copyright (c) 2010 Dow Jones & Co.
(END) Dow Jones Newswires
18-08-10 0343GMT
