Qatar play for EFG Hermes stokes backlash in Egypt
By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Qatar‚Äôs move on EFG Hermes is provoking a backlash. The Gulf emirate‚Äôs play for key assets of the region‚Äôs preeminent investment bank has prompted a rival consortium, notably backed by billionaire Naguib Sawiris, to declare an interest in buying it outright. The Qatari deal was approved last week by shareholders, but in the current volatile situation anything can happen.
The possible bidding war highlights the rising Egyptian concerns over the country‚Äôs financial relations with Qatar. The rival Planet consortium promises to ‚Äúprevent the breakup of a flagship Egyptian multinational‚ÄĚ and is counting on regulatory intervention.
EFG shareholders support the deal that will give state-backed QInvest control of 60 percent of the firm‚Äôs investment banking business, with an option to buy the rest. That prevents EFG opening its books to Planet, which wants to see them before launching a formal bid. So far its mooted offer, at a 23 percent premium to the last closing price, still undervalues the bank.
Unless the regulator disagrees with the valuation of the QInvest deal, or minority shareholders challenge it, lawyers say there is no legal basis to stop the EFG tie-up with Qatar. Yet in Egypt‚Äôs fast changing political environment, and considering this would be the country‚Äôs first hostile takeover, people close to the bank concede anything could happen.
Planet‚Äôs pledges to keep EFG whole, and Egyptian, play into wider fears over Qatar‚Äôs influence in post-Mubarak Egypt. EFG‚Äôs co-chief executives were known to be close to the former regime, and they face accusations of illegal share dealing. Qatar, on the other hand, has noticeable ties to the Muslim Brotherhood, which dominates parliament and has a strong chance of taking the presidency.
The stakes for Egypt are high. Qatar has provided $500 million of budgetary aid to Cairo. It says it is prepared to invest up to $10 billion into all types of projects, including a stake in a new $9 billion port near the strategic Suez Canal. This has prompted rival presidential candidate Ahmed Shafiq, a former Mubarak prime minister, to pledge to ‚Äúdefend the Suez Canal, which others want to give to foreigners‚ÄĚ. Either way, Egypt badly needs investment.
EFG‚Äôs deal with Qatar looked like a deliberate political re-alignment of the bank in the absence of other options. There might still be another, Egyptian, way out.