Transaction is one of the largest foreign direct investments in Egypt since the 25 January Revolution
EFG Hermes Holding S.A.E (“EFG Hermes”) and QInvest L.L.C. (“QInvest”) are delighted to announce that they have entered into a definitive agreement involving EFG Hermes’ Brokerage, Research, Asset Management, Investment Banking and Infrastructure Fund businesses (the “Business”). Pursuant to the agreement, EFG Hermes and QInvest will enter into a joint venture at the level of EFG Hermes Qatar LLC (“EFG Hermes Qatar” or the “JV Company”), to be 60% owned by QInvest and 40% owned by EFG Hermes. The JV Company shall be the entity holding the Business post-closing. This announcement follows the initial press release on March 26, 2012, when the two parties agreed to explore a potential strategic alliance with the aim of creating a leading investment bank with operations in the Arab world and beyond, comprehensively covering the Middle East, Africa, Turkey and South and South East Asia.
EFG Hermes’ position as the largest provider of investment banking, asset management and brokerage services across the Arab world will be strongly complemented by QInvest’s financial strength and client base. The aim will be to offer an enhanced product offering to QInvest’s extensive corporate and private client base in Qatar and the GCC region and to use the combined platform and resources to expand the joint venture’s reach into the fast growing regions of Sub-Saharan Africa and South and South East Asia. QInvest’s clients will benefit through the developed platform of EFG Hermes from direct access to the investment bank’s services in markets across the Arab world, as well as to trading platforms on the major Arab exchanges.
The joint venture will provide a strong catalyst for the further development and deepening of the MENA financial markets and their interconnection with the rapidly growing nascent markets in Africa and South and South East Asia as well as Turkey. The joint venture will also facilitate cross-border capital flows and enable international investors and corporates to actively participate in the economic development of the region.
As a result of the transaction, QInvest will inject US$250m in the form of a capital increase at the level of EFG Hermes Qatar that will be used in consideration for transferring the Business to the JV Company. EFG Hermes will have the right to sell its entire 40% shareholding in the JV Company to QInvest at any time during the period between 12 to 36 months from signing of the transaction at a price of EGP 1,000m (c.US$165m). QInvest will have the right to acquire from EFG Hermes its entire 40% shareholding at any time during the period between 12 to 36 months from signing of the transaction at the higher of US$165m or fair market value at the time of the exercise subject to a cap. At closing QInvest will also acquire from EFG Hermes 60% of the seed capital of the asset management business at market value.
Closing is conditional on shareholder approval at the general assembly of EFG Hermes and the receipt of relevant regulatory approvals. The transaction is expected to close in the third quarter of 2012. The JV Company will operate under the EFG Hermes brand name and will be led by Karim Awad and Kashif Siddiqui as Co-CEOs, who are currently Head of Investment Banking and Head of Asset Management respectively.
Commenting on the announcement, the Chairman of QInvest, H.E. Sheikh Jassim Bin Hamad Bin Jassim Bin Jaber Al Thani said: “We look forward to establishing this strategic partnership with EFG Hermes that will position our firms to leverage the large potential for economic growth in the region and to play a pivotal role in its long-term development. The alliance will enable us to bring the expertise necessary to capitalize on the desires of many regional and foreign investors who are seeking to play a significant role in the region’s economic development and who are willing to invest across the Middle East, Africa, Turkey and South and South East Asia.”
Shahzad Shahbaz, Chief Executive Officer of QInvest commented, saying: “By bringing together our own capabilities at QInvest with EFG Hermes’ position as the region’s largest investment bank, we are confident that we can create the leading investment banking platform of choice across the Middle East, Africa, Turkey and South and South East Asia.”
EFG Hermes’ Board of Directors Chairperson Ms. Mona Zulficar commented, saying: “We share a common vision with respect to the future prospects of various markets including Egypt and other high-potential economies in Africa and Asia. Such an alliance will continue to entrench the testament of our value creation strategy that we have implemented for our shareholders.”
“Our primary objective reflected by these agreements will be to create an investment banking platform that will play a vital role in the flow of foreign capital into the region while enabling Arab investors to participate in future investment opportunities in the geographies that will fall under the umbrella of this new platform and to continue to build on the success that our team has achieved over the years,” commented EFG Hermes’ CEO Hassan Heikal, who will be overseeing the transition phase to the JV Company.
EFG Hermes’ CEO Yasser El Mallawany commented, saying: “The alliance with QInvest through which we can combine our expertise in our chosen businesses would be a significant turning point in supporting investments in the Arab world and it would crystallize the value of our preeminent investment banking platform. EFG Hermes’ stakeholders will benefit from this alliance which aims to accelerate the development of our businesses and strengthen our footprint with a durable partner for growth.”
Following the closing of the transaction, EFG Hermes will recommend to its board of directors an EGP4 special dividend per share.
EFG Hermes was advised by EFG Hermes Investment Banking, J.P. Morgan and Freshfields, QInvest was advised by Goldman Sachs International, QInvest Investment Banking and Hogan Lovells.