The proposed joint venture between EFG Hermes and Qatar-based investment bank QInvest has been terminated due to both parties not receiving the necessary regulatory approvals from the Egyptian Financial Supervisory Authority (EFSA), according to a joint press release.
A clause in the agreement signed by EFG Hermes and QInvest on 4 May 2012 for the proposed joint venture stipulates that the transaction must be cancelled 12 months from that date, or 3 May 2013, if it does not receive all the necessary regulatory approvals.
According to the release, Egypt’s EFSA was the only supervisory body among the target markets which the joint venture was slated to operate in, which missed the date.
“The parties received the necessary financial services regulatory approvals in all other markets in which the joint venture was initially to operate including Qatar, the United Arab Emirates, Saudi Arabia and Jordan, among others,” said the release.
Head of EFSA Ashraf Al-Sharqawy had said in early April that the deal documents submitted by both institutions were “incomplete”, but EFG Hermes replied in a statement that it was waiting to obtain “letters from the authorities” for the merger after answering all EFSA’s comments.
“EFG Hermes and QInvest cooperated fully with all regulators, met all of their requirements and exercised the utmost diligence in addressing any regulatory requests in a timely and comprehensive manner,” both institutions said in the joint release.
Minister of Investment Ossama Saleh said on Monday that a final decision on the deal was likely to be made by EFSA before the deadline.
EFG Hermes said on 7 April however that it expected EFSA to miss the cut-off date.
It is unclear whether EFG Hermes and QInvest will try to reform the joint venture at some point in the future, but the release added that both institutions would be “separately creating value for their shareholders” and would “remain open going forward in capitalising on their complementary strengths to pursue together suitable business opportunities in a less-structured framework”.
The joint venture was set to be named EFG Hermes Qatar, with QInvest controlling 60% and EFG Hermes controlling the rest.
In a separate statement released to shareholders informing them of its strategic direction following the collapse of the agreement, EFG Hermes said that it would be focusing on regional growth opportunities by jettisoning a number of non-core assets, as well as effecting a cost cutting plan “already being implemented” with a targeted cost structure of EGP 500m for 2014. It also said it would be making available cash on its balance sheet “in excess of $400m” minus leverage.
EFG Hermes’ stock reached a five-month low last week, triggered by the uncertainty surrounding the deal.
Neither EFG Hermes nor QInvest could be reached for comment.