CAIRO/BEIRUTL EFG-Hermes will buy a 65 percent stake in Lebanon’s privately owned Credit Libanais for $542 million as the leading Egyptian investment bank sets out to diversify its business.
EFG-Hermes said on Tuesday it would use its cash resources for the payment and said it had a call option to buy an additional 25 percent over the next two years at the same price.
EFG-Hermes shares ended up 2 percent on the news at LE 28.01 ($4.91). Egypt’s benchmark index closed up 1.5 percent.
The Egyptian bank, which operates in other Middle East states, said the deal would aid expansion into Lebanon and the Levant and help broaden its product range in retail, corporate, Islamic and online banking, as well as consumer finance.
"The transaction is expected to be earnings accretive from the first full year of the acquisition (i.e. 2011) before any synergy assumptions," EFG-Hermes said, adding that the implied value of $834 million for 100 percent of Credit Libanais represented a multiple of about two times shareholders’ equity.
Sami Nseiri, an adviser to the Credit Libanais chairman, said the deal "opens wider horizons to develop our markets in the Arab world and in Africa and later in Europe."
He said it was too early to decide on any listing for the bank and predicted no changes to its management.
The Egyptian bank ended talks to increase its share in Lebanon’s Bank Audi late last year after the parties were unable to reach agreement and in January EFG-Hermes sold its stake for $913.4 million.
"They would like to diversify their business and they have a very high cash position that they needed to utilize. The question I have is why Lebanon again?" Radwa El-Swaify at Beltone Financial said.
She said EFG-Hermes’ cash position was LE 4.6 billion at the end of June, or a net LE 3.9 billion after debt.
"The idea (for EFG-Hermes) was not to exit the Lebanese market but to exit the Bank Audi investment and look for another investment in the banking sector," said Nassib Ghobril, head of economic research and analysis at Lebanon’s Byblos Bank.
"It means that the level of confidence in the Lebanese banking sector remains high and it’s an attractive destination for foreign investments." The bulk of the ownership in Credit Libanais, which has 62 branches in Lebanon, is split between Capital Investment Holding, Bahrain and Capital Investment Holding, Lebanon, its website said.
Credit Libanais reported net income of $36 million in the first half of 2010, EFG-Hermes said, adding that this implied a return on equity of about 18 percent.