EFG Hermes shares continue to rise after FAB's offer to buy majority stake

Shares of EFG Hermes, Egypt's largest investment bank, rose on Thursday, carrying the momentum into the second trading day after receiving a non-binding offer on Wednesday from the UAE’s First Abu Dhabi Bank for the acquisition of a majority stake.

The offer to buy no less than 51 per cent share capital from FAB, the UAE’s biggest bank by assets, values EFG Hermes at about $1.2 billion. FAB offered 19 Egyptian pounds ($1.21) per share, a premium of about 21 per cent on EFG Hermes's closing price on February 8.

EFG Hermes stocks were briefly suspended on Wednesday, but surged as much as 19 per cent, the highest level on an intraday basis in almost five years after trading resumed in Cairo. The share closed the day 9.28 per cent higher at 17.20 pounds. The shares were trading 3.31 per cent higher at 17.77 pounds at 3:50pm UAE time.

The stock has rebounded about 54 per cent since last year’s low in August, giving the bank a market value of just over $1 billion, data compiled by Bloomberg shows.

FAB, which rose 1.52 per cent to Dh20.10 ($5.47) on the Abu Dhabi Securities Exchange on Wednesday, closed trading 0.8 per cent up at Dh20.26 per share on Thursday.

The EFG Hermes board is considering FAB's offer and the “completion of the transaction and setting the final price is conditional on the completion of the due diligence examination process and obtaining approvals in accordance with regulatory requirements,” EFG Hermes said in a regulatory filing.

FAB said its offer is beneficial for both parties and "represents an attractive liquidity event and a compelling value proposition for EFG Hermes' shareholders, reflecting the company’s robust fundamentals and strong future growth prospects".

"This potential transaction would represent a significant milestone for FAB, in line with the bank’s long-term strategic ambitions to become the reference institution for investment banking in the region," FAB said.

"It provides enhanced scale, specialisation, growth levers and revenue synergies, strengthening FAB’s offering and regional presence. This potential transaction will build on EFG Hermes’ strong investment banking capabilities, track record and reputable brand."

The success of the proposed transaction will mark FAB’s second acquisition in the Arab world’s most populous nation and the region's third largest economy. FAB agreed to buy Bank Audi Egypt in January 2021 and received regulatory approval in April for the deal. It began integrating the Lebanese bank's Egyptian operations in May and said it expects to complete the process by 2022.