CAIRO: Talk of a merger between Pioneers Holding and investment bank Beltone Financial has set the business community in Egypt and the region abuzz.
The deal will create a firm with LE 29.2 billion under management, officials form the two companies said at a press conference Tuesday, expecting the merger to create the second largest brokerage in Egypt.
On Saturday Beltone Financial Holding and Pioneers Holding reached an agreement over the timetable for a full merger of the two companies.
The merger process will see Pioneers buying Beltone Financial by issuing 100 million new shares valued at LE 777 million, which will constitute about 17 percent of the companies’ combined capital.
The transaction is expected to be completed within six to eight weeks after the due diligence process. The combined companies will have more than 1,500 employees working in 36 offices in the Middle East and one in New York, according to Reuters.
The management of the two companies will remain separate, but both will report to one board which is still to be announced.
Beltone and Pioneers rank second and third, respectively, on the Egyptian brokerage market. The merger is expected to consolidate the position of the resulting entity to second with a total turnover of LE 70 billion.
The merger will see both firms synergize their operations to capitalize on their position in the MENA region, and offer clients more services and products. The partnership will allow the two companies to leverage each other’s strengths, said Mansour Al-Gammal, Pioneers’ vice chairman.
“The strategic advantage is complementarily. They have the distribution network, we have the product, said Beltone Financial CEO Aladdin Saba.
Saba also pointed out that they are already getting a positive feedback on their merger plans from clients and interested financial organizations.
Reuters reported on Saturday that Pioneers shares went up by 7 percent that day; a similar jump in trade was observed last Wednesday when negotiations first started. On Wednesday its shares were traded at LE 8.10.
Beltone was established in 2002, and today it manages LE 28.7 billion in assets and LE 42 billion in investment banking transactions.
It was the first company in Egypt to launch money market accounts denominated in US dollars, euros and Egyptian pounds, in affiliation with Banque Misr and Egypt Post. It was also the first to introduce a 401K-type tax-efficient savings plan and the first regional hedge fund.
Pioneers was established in 1997 and since then it has registered remarkable growth and expansion acquiring Prizma Securities in 2007 and 20 percent of Concord International Investments in 2008.
It is ranked first in retail brokerage on the Egyptian market, and it serves around 90,000 investors in the MENA region.
Saba’s prognosis of the future development of the Pioneers-Beltone union is positive, despite the persistence of the financial crisis in the West. “We were very fortunate in the MENA region, and especially in Egypt, as the crisis did not have a very strong effect, he said.
Saba explained that Beltone was hit by the global economic downturn between September 2008 and May 2009 when there was a significant drop in profits but the company remained profitable.
In his opinion, the challenges in the Egyptian market right now are the underdevelopment of the fixed income market and the lack of reform in pension industry.