VENTURES AFRICA – Egypt’s largest investment bank, EFG Hermes and Qatari Islamic investment bank QInvest are in possible merger negotiations.
In a joint statement issued on Monday, both companies are considering merging some of their operations creating a n investment bank covering the Middle East, extending to Africa and the Southeast Asia.
The statement indicated plans to “a potential strategic alliance” with the ultimate goal to “create a leading investment bank with operations in the Arab world and beyond.”
The venture would include securities brokerage, asset management and investment banking operations. Although no date was announced for the deal, Cairo-based EFG Hermes says its private equity division will not be included in the negotiations
Both Middle East Investment banks didn’t provide financial details or give a hint as to whether the deal will proceed. In a statement by EFG Hermes and QInvest, the two institutions indicated plans to assess potential synergies and if an agreement is reached, the firms would announce a general framework of a joint venture and a timetable for its implementation.
EFG Hermes reiterated in the statement that the primary objective in the discussions will be to create an investment banking platform that will play a vital role in the flow of foreign capital into the region, as well as enable Arabs to invest in the region.
According to its website, QInvest is a privately held bank with paid-up capital of $750 million and operations in Qatar, Turkey and Saudi Arabia. Its shareholders include Qatar Islamic Bank, other institutional investors and high net worth individuals. It is based in the Oil-rich state of Qatar.
EFG Hermes has a market value of $1.08bn and with operations in nine Arab countries. It also controls a 65% stake in privately-owned Lebanese bank Credit Libanais, which it bought in 2010 in a private equity deal worth $542 million.
The talks come at a time when the region’s wider financial industry is under pressure to consolidate due to falling profits as the Middle East investment banking industry has been going through a torrid period since the 2008 financial crisis and the subsequent real estate uprising in the region.
Though the region’s financial markets have recovered in 2012, according to figures from data provider Dealogic, in 2011, total investment banking net revenues in the region fell to $523 million, from $590 million in 2010, hitting the lowest level since 2005.