Overview
EFG Hermes Investment Banking division has cemented its regional leadership position in M&A advisory, ECM and DCM executions, becoming the trusted partner for MENA and non-MENA FEM clients and partners. The division is constantly expanding its reach, executing some of the largest and noteworthy deals across its focus markets. EFG Hermes Investment Banking deploys the largest and most diverse group of professionals in the region who bring deep understanding of companies, industries, markets, and economies with proven global knowledge and execution expertise. The team’s on-the-ground presence combined with a flexible business model that quickly adapts to changing market dynamics have allowed the Firm to offer advisory on a multitude of value-added services to an ever-growing client base.
By 2020, the division had executed a total of 281 ECM, DCM, and M&A deals across its footprint, worth an aggregate value of over USD c.120 billion. It holds a 5% market share of overall deal executions according to 9M2020 rankings from Refinitiv’s ECM MENA League Tables, has placed among the top five on Bloomberg and Thomson Reuters’ Middle East ECM League Tables since 2015, and first on the 2019 Refinitiv ECM League Table.
Operational Highlights of 2020
2020 was a challenging one for markets the world over due to an overall slump in investor sentiment as a result of the COVID-19 pandemic and lockdown measures that dampened economic activity. While the division had lined up a healthy transaction pipeline across the FEM space for 2020, the unraveling situation put much of them on hold. The crisis necessitated a swift and calculated shift of focus toward the DCM space, an asset class that the division had laid groundwork on in years previous as part of its product diversification strategy. As a result, the division managed to book an outstanding 24 transactions for the year by leveraging improved efficiencies across the full spectrum of its operations, its growing network of strategic relationships, and improved execution capabilities. With 40 of some of the most talented investment banking professionals, the division closed several cross-border deals during the year, many entirely remotely. EFG Hermes’ Investment Banking team closed 14 DCM transactions at a value of USD 757.6 million, three ECM transactions worth USD 828.1 billion, and seven M&A deals valued at USD 99.0 million. Its success was recognized by multiple international awarding bodies this year, having been named Best Investment Bank in Egypt at the 2020 Euromoney Awards for Excellence, Best Corporate and Investment Bank in Egypt by Asiamoney, Best Investment Bank in the Middle East and Best Investment Bank in Egypt by Global Finance, as well as Best Investment Bank in Egypt in the EMEA Finance African Banking Awards..
As part of its drive to continue to expand its presence in the Kingdom of Saudi Arabia, EFG Hermes successfully completed advisory on Dr. Sulaiman Al Habib Group’s SAR 2.63 billion (USD 700 million) IPO on Tadawul, with the Firm acting as joint bookrunner on the deal. The transaction laid solid foundations for further ECM executions in Saudi Arabia in 1Q2021.. At home, the Firm concluded advisory on a USD 50 million sale of a c. 7% stake in Fawry, following on from the success of the IPO in 2019. EFG Hermes acted as sole bookrunner on behalf of the selling shareholders on the electronic payment platform operator’s accelerated offering.
In the M&A space, EFG Hermes Investment Banking began 2020 with the conclusion of a share purchase agreement between Japan-based Tokio Marine Group, GB Capital, and EFG Hermes Finance, which saw the sale of a 75% stake in Tokio’s Egyptian life insurance subsidiary Tokio Marine Egypt Family Takaful, valued at USD 5.4 million (EGP 84.75 million). On the frontier front, EFG Hermes successfully completed advisory to Pakistan’s United Bank Limited (UBL) on the sale of the assets and liabilities of its Tanzanian subsidiary, UBL Tanzania (UBLT) to Exim Bank Tanzania Limited. The UBL advisory is EFG Hermes’ first cross-border M&A transaction in East Africa since entering the Kenyan market in 2017..
2020 saw the division turn its focus towards developing its DCM capabilities and product offering, particularly in the securitization and sukuk space. In November, the division concluded a seven-year USD 265 million debt arrangement for Orascom Development Egypt (ODE). The Firm acted as financial advisor, lead manager, global coordinator, and bookrunner for the transaction. It also successfully concluded debt arrangements for ADES Investments (USD 13.0 million), NCHD (USD 23.2 million), Marakez (USD 95.5 million), and Actis (USD 14.5 million).
Securitization is a new and burgeoning asset class in Egypt, coming into increased focus over the last two years. EFG Hermes has capitalized on such growth, making numerous strides to offer key securitization issuances for clients in 2020 and closing six securitization transactions at a combined value of USD 532 million. The Firm acted as financial advisor, MLA, and underwriter on the USD 10.9 million second issuance and USD 10.1 million third issuance of Premium International for Credit Services securitization program. The division also acted as financial advisor, MLA, and underwriter on the USD 27.9 million first issuance and USD 55.6 million second issuance of a securitization program for TMG Holding and a USD 34.9 million securitized bond for Tanmeyah Microenterprises.
The division closed two sukuk deals in 2020 at a value of USD 68 million as part of its drive to build its debt franchise in Egypt. In April, the Firm acted as sole financial advisor, sole lead arranger, sole bookrunner, and sole underwriter for a EGP 2 billion sukuk issuance for TMG Holding, Egypt’s first ever corporate sukuk issuance, which was 2.5x oversubscribed. Additionally, during the year, the division acted as sole financial advisor, lead arranger, and bookrunner on the USD 38 million sukuk issuance of Cairo for Investment and Real Estate Development, the first of its kind in Egypt’s education space.
2020 Deals
Throughout the year, EFG Hermes concluded an outstanding number of landmark deals across MENA and non-MENA frontier emerging markets.
ECM Deals
Sulaiman Al Habib IPO Joint bookrunner on the USD 700 million initial public offering of the Saudi healthcare operator.
Aramex Accelerated Offering – Advisor on the USD 77.7 million accelerated equity offering of a stake Dubai-based logistics firm Aramex.
Fawry Accelerated Offering – Sole bookrunner on the USD 50.4 million accelerated equity offering of a 7.1% stake in payment platform Fawry.
M & A Deals
Tokio Marine Family Takaful Egypt Stake Sale– Sell side advisor on the USD 5.4 million sale of a 75% stake in the Egyptian insurance player.
Americana Stake Sale Sell side advisor to the USD 26.6 million sale of a 97.5% stake in the Kuwait-based food and beverage player to the Egyptian Starch and Glucose Company.
Masria Digital Payments Stake Sale – Sell side advisor on the sale of a 43% stake in Masria Digital Payments to AfricInvest, a leading Pan-African private equity platform.
Exim Bank Tanzania Limited Sale – Advisory on Pakistan’s United Bank Limited (UBL) sale of the assets and liabilities of its Tanzanian subsidiary, UBL Tanzania (UBLT) to Exim Bank Tanzania Limited.
Suez Cement MTO– Advisory on the mandatory tender offer and delisting of Suez Cement amounting to USD 12.3 million.
Tourah Cement MTO– Advisory on the mandatory tender offer and delisting of Tourah Cement amounting to USD 6.0 million.
Ridgewood Sale– Advisory on the sale of 100% of Ridgewood worth USD 27 million to a joint venture between Hassan Allam Utilities and Almar Water Solutions.
DCM Deals
ODE Debt Arrangement – Financial advisor, lead manager, global coordinator, and bookrunner for the transaction, which was worth USD 265.0 million.
ADES Investments Debt Arrangement – Worth USD 13.0 million.
NCHD Debt Arrangement – Worth USD 23.2 million.
Marakez Debt Arrangement– Worth USD 95.5 million.
Actis Debt Arrangement– Worth USD 14.5 million.
EFG Hermes (HSB) – Short-term Bond – Worth USD 31.8 million.
Premium Card Securitization Program – The division acted as financial advisor, MLA, and underwriter on the USD 10.9 million second issuance and USD 10.1 million third issuance of a securitization program for Premium Card.
TMG Holding Securitization Program – The division acted as financial advisor, MLA, and underwriter on the USD 27.9 million first issuance and USD 55.6 million second issuance of a securitization program for TMG Holding.
Tanmeyah Securitized Bond – The division acted as sole financial advisor, lead arranger, bookrunner and underwriter of a USD 34.9 million securitization bond for Tanmeyah.
TMG Holding Sukuk Program – The first of its kind in the Egyptian market, the division was sole financial advisor, lead arranger, bookrunner, and underwriter on the EGP 2 billion sukuk issuance for TMG Holding.
CIRA Sukuk Program – The division acted as sole financial advisor, lead arranger, and bookrunner on the USD 38 million sukuk issuance of Cairo for Investment and Real Estate Development.
Key Financial Highlights of 2020
The division reported total revenues of EGP 237 million in FY20, a 28% decrease compared to EGP 328 million in FY19. EFG Hermes Investment Banking fees and commissions contributed approximately 4% of EFG Hermes’ total revenue in FY20.
2021 Outlook
In recent years, the EFG Hermes Investment Banking division has significantly expanded both its product offering and geographic footprint, entering some of the world’s most rapidly growing markets in Sub-Saharan Africa and Southeast Asia. In the coming year, the division plans to continue to build on the successful franchise it has developed over the years, deepening its ECM and M&A capabilities across its footprint and expanding its presence in the DCM space.
As equity markets began to pick up toward the end of the year, the division expects its ECM pipeline to ramp up in 2021, both in the MENA region and FEMs. Having already lined up several deals in the kingdom for the year to come, EFG Hermes Investment Banking is particularly bullish on activity in Saudi Arabia, remaining confident that the strong fundamentals that underpin the market will drive economic growth across the wider region. Egypt is also expected to fare better in terms of IPO activity in the year to come, with improved market dynamics already being seen toward the end of 2020 as foreign trading activity picks up. The division is working on several listings, two of which are lined up for foreign companies on the EGX, which are expected to take place in the first quarter of 2021.
The division will also continue to carve out a greater space in the DCM asset class, particularly securitization and sukuk in its home market of Egypt, and work to expand this expertise across its footprint. At the same time, post-COVID alternative financing is becoming ever important, including bridge facility arrangements and short-term financing deals. With the division’s already established merchant banking platform, which has seen it deploy USD 50.9 million in 2020 alone to facilitate financing for clients, it plans to continue to grow its merchant banking capabilities to both serve clients and generate business.