Sawiris and Tarek Amer fight: flashback to previous battles with the state?

Doaa Farid
11 Min Read

Amid the government’s huge efforts to attract investment, Egypt’s businessmen have decried the bureaucracy that comes along with setting up a new business.

In an opinion article published in the state-owned newspaper Akhbar Al-Youm earlier this week, business tycoon Naguib Sawiris accused the governor of the Central Bank of Egypt (CBE), Tarek Amer, of interfering in order to stall Sawiris’ bid to acquire the prominent investment bank CI Capital.

The business tycoon said that Amer, who is also the former head of the National Bank of Egypt (NBE), had advised NBE’s subsidiary Al-Ahly Capital to compete with Sawiris in the bid.

Sawiris said the move cast a shadow on the investment climate in Egypt. “For investors, I tell you to take care because if you wanted to invest in Egypt, the state will interfere and compete with you using public funds,” he said.

Narrating his battle to acquire CI Capital, Sawiris insisted that Amer used his position to prevent state-owned banks from funding the bid.

In his article, Sawiris questioned the possibility of holding the CBE governor accountable if he had, indeed, misused his authority.

Sawiris wasn’t only telling potential investors his experience, he was delivering a message to state officials to “practically encourage” investors. He was also protecting his dream of acquiring a commercial bank. In statements to Daily News Egypt in November, Sawiris said Egyptian regulations are turning his dream into a nightmare.

The accusations prompted Amer to deny any such thing in a televised interview on 26 March with satellite TV channel CBC. Amer defended himself by saying that there are regulatory rules for loaning acquisition bids.

After taking his role, Amer issued a new decree preventing banks from financing more than 50% of the value of any acquisition.

Days before his article, Sawiris criticised Amer, in a conference organised by the American Chamber of Commerce in early March, for the way he dealt with the dollar crunch.

Sawiris said that Amer is adopting the same policy of former CBE governor Hisham Ramez, which is controlling the value of the Egyptian pound, even though its value in the unofficial market is much higher.

Egyptian telecoms tycoon Naguib Sawiris
Egyptian telecoms tycoon Naguib Sawiris

Sawiris’ bid stalled, EFSA is yet to decide

The new deal is stranded and the Egyptian Financial Supervisory Authority (EFSA) is still studying the offer.

Head of EFSA Sherif Sami said in a Monday statement: “the authority is yet to say whether it has approved or disapproved the deal.”

The EFSA controls the destiny of the offer as the three involved companies—OTMT, CI Capital, and Beltone—are listed in the stock market.

“Once the decision is made, the Stock Market will announce it, not any other party,” Sami explained.

Orascom presented its official offer in February and a few days later the Commercial International Bank (CIB) approved the OTMT to purchase 100% of the bank’s stake in CI Capital for a value of EGP 924m.

The new deal emerged a month after Sawiris’s OTMT acquired Beltone Financial in a deal worth EGP 650m last November.

OTMT’s intentions to acquire the investment bank were first reported in December 2015. Al-Ahly Capital expressed a written interest in making an offer for CI capital but did not proceed in the acquisition process.

Al-Ahly Capital’s offer was expected to spark the competition, according to statement of CI Capital CEO Mahmoud Atallah at that time.

A report issued by Mubasher Financial Services (MFS) suggests that CIB will make profits of EGP 443m once the merger is complete. CEO of Naeem Investment Banking Youssef Al-Far said the merger will not impact the financial services sector.

Reflections on Sawiris’ statement

A day after Sawiris’ statements, the performance of the stock market slumped in the main indices, following his vision that the state is fighting businessmen, according to Chairman of Egyptian-Swiss Company for Brokerage Akram El-Masry.

An official in a prominent investment bank, who requested anonymity, told Daily News Egypt that the deal is important and the involved parties are “influential”.

“That’s why it is taking so much time to decide on the bid,” he said.

According to the source, Amer could insist on influencing the final decision of the bid. “I believe he might take issues personally and his last decision to limit the period of chairing private banks to nine years is a clear example,” he said.

In his article, Sawiris referred to the recent announcement of the appointment of former CBE head Ramez to the Commercial International Bank (CIB), saying that it prompted Amer to issue his new decision, which is believed to be the dismissal of the CIB head.

Economy professor Mohamed Youssef awaits the completion of the deal, saying that merger and acquisition activities would send a positive message to foreign investors about the investment climate in Egypt.

Governor of the Central Bank of Egypt (CBE), Tarek Amer
Governor of the Central Bank of Egypt (CBE), Tarek Amer

What does the CI Capital acquisition mean to Sawiris?

“Combining the two companies will provide a larger client base, allowing more services to be offered to clients,” Sawiris said earlier this month during a conference held by the American Chamber of Commerce.

According to Sawiris, the market is divided into one major player, referring to EFG Hermes, and other small and medium players.

The deal will help him create a new major player in the investment market.

Following the finalisation of Beltone’s acquisition of CI Capital, the companies will acquire an electronic brokerage company in Egypt, he said.

Over the first nine months of 2015, CI Capital and Beltone Financial acquired 26.7% of the brokerage activity in Egypt, against 14.2% achieved by EFG Hermes.

OTMT, of which Sawiris has 51.7% of its shares, acquired Beltone international last month with a deal worth EGP 650m and had a large liquidity of EGP 1.9bn.

The company enjoys a special position amongst investment banks sector in Egypt, followed by four subsidiary companies operating in security brokerage, asset management, and investment banking.

The two brokerage companies are CI Securities Brokerage and Dynamic Brokerage Company, among other subsidiary companies.

CI Capital also holds CI Assets Management (CIAM), which is managing assets worth EGP 10bn, eight funds of which amounting investments of EGP 6bn, while EGP 2bn are fixed income, and two equity funds. It also holds three monetary funds, one of which is Islamic and one a capital protection fund.

Beltone Financial manages a volume of assets worth EGP 32.3bn through funds and portfolios exceeding 15 funds, according to the company’s latest statistics. These funds vary between equity, fixed income, portfolios, saving, and retirement plans. Beltone holds several sub assets including, Beltone Investment Banking, Beltone Asset Management, Beltone Securities Holding, and Beltone Administration Company.

The investment bank CI Capital was founded 10 years ago in May 2005. Its primary objective has been to compete with EFG Hermes to control the financial services market, especially when Egyptian billionaire Naguib Sawiris sold 39% of CI Capital in August 2008 to the Commercial International Bank (CIB).

The business community also believed CIB would support the company’s plan to control a stake of financial services, equivalent to that of EFG Hermes. CIB had indeed completed the EGP 800m acquisition and lifted the company’s capital from EGP 50m to EGP 550m.

Ten years later, however, CI Capital is still unable to compete with EFG Hermes in the local or regional market.

Sawiris wanted to change the game in 2014 when he attempted to acquire EFG Hermes.

In June 2014, Naguib allied with Beltone Financial in a bid to acquire 20% of EFG Hermes. The alliance was conditioned upon the purchase of 20% of Hermes, or 114m shares as offered by shareholders.

A request to amend the purchase offer was required if they wished to purchase only 9%, the total of what was offered by shareholders. The acquisition bid did not, however, proceed.

Sawiris might face the same destiny in 2016. Youssef said Sawiris might repeat his 2013 actions, a time when he felt Egypt was not the place for investments.

Following the election of Mohamed Morsi in 2012, Sawiris travelled to the UK, where he spent a few months, as a result of being targeted by the Tax Authority, which requested billions of dollars from Nassef Sawiris and his family in tax arrears.

Naguib then returned in May 2013, one month before the uprising in 30 June in 2013, which ousted Morsi from power with the help of then defence minister Abdel Fattah Al-Sisi.

During that period, the tax authority reconciled with the multi-billionaire Sawiris family and the dispute was settled by agreement to pay a little over $1bn over a five year period, with an immediate payment of $357m.

The government at that time did not seem to want to lose Sawiris and he was greeted by an envoy from the presidency, giving a positive message to businessmen.

The following days will show the reaction of the state authorities to Sawiris attempts to win a “battle” against Amer, Youssef said.

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