EFG-Hermes is looking once again to control a Lebanese bank, but this time, it appears it may be successful. The largest publically traded investment bank in the Arab world announced on August 17 that it has entered into an agreement to buy a 65 percent stake in Lebanon’s Credit Libanais for $542 million, with a further call option to purchase another 25 percent at the same share price within the next two years.
EFG-Hermes was able to use its own cash reserves to buy the bank from Capital Investment Holding, a Bahraini holding company with a Lebanese arm. The group has been holding onto a large stash of cash totaling close to $1 billion since it sold its stake in Bank Audi in January.
“The transaction is expected to be earnings accretive from the first full year of the acquisition before any synergy assumptions,” said EFG-Hermes in a press release.
Credit Libanais has branches in Cyprus and Bahrain as well as a representative office in Canada. It is the local network and retail and commercial banking services that made the bank attractive to EFG-Hermes, which is choosing to acquire its way to becoming a universal bank.
EFG-Hermes was formerly a major stakeholder in Lebanon’s Bank Audi, holding 28 percent of the bank until January 18. The Egyptian giant sold its stake to a group of unidentified investors for $913 million when it became clear that further acquisition was unlikely, and control of the bank was unwelcome.
“In less than a year after the profitable disposal of its stake in Bank Audi, EFG-Hermes has secured a sizeable commercial bank at attractive terms and re-enters the Lebanese banking market… [The] acquisition will transform EFG-Hermes and facilitate the expedient roll-out of our regional commercial banking strategy delivering significant benefits for our shareholders,” said, Mona Zulficar, EFG-Hermes’ chairperson of the board of directors.
EFG-Hermes posted an 83.2 percent year-on-year rise in profits at the end of June, growing net profits to $101.9 million, according to Zawya. Shares of EFG-Hermes gained 2.4 percent on the announcement of the sale to reach $4.91.
According to Credit Libanais, final decisions as to changes among the board of directors at the Lebanese alpha bank are still being negotiated but EFG-Hermes will be represented on the bank’s board. EFG-Hermes has made it clear that the management of Credit Libanais will remain the same.
The deal is now awaiting approval from Banque du Liban, Lebanon’s Central Bank, which could take months. Credit Libanais was reportedly valued at $834 million for the acquisition.