Dubai: A strong recovery of Gulf stock markets, rising numbers of mergers & acquisition (M&A) opportunities in sub-Saharan Africa and overall revival in the debt capital markets activity in the Middle East and North Africa region is expected to boost the revenues and profits of EFG Hermes, a leading investment bank in the region.
“Liquidity is once again abundant in the GCC [Gulf Cooperation Council]. Stock valuations have recovered substantially backed by strong economic growth and corporate earnings. The valuation recovery is working as a strong incentive for many company managements to consider initial public offerings,” said Hisham Halbouny, director of investment banking
EFG Hermes sees sub-Saharan Africa as a new frontier of opportunities as economies in the region are booming with an average annual gross domestic product (GDP) growth of 7 per cent with a substantial increase in affluent middle class population that is driving demand in key sectors such as utilities, hospitality and retail.
These growth sectors are seen attracting multinationals and private equity players who are boosting M&A deal flows to these markets.
EFG Hermes Investment Banking is presently closing its advisory to the Al-Futtaim Group on the acquisition of CMC Holding, the largest automotive distributor in Kenya. The public tender offer closed during the first quarter with a 91 per cent acceptance rate, and the transaction just came to a conclusion.
The Al-Futtaim transaction, which is EFG Hermes Investment Banking’s first in sub-Saharan Africa, is the latest in a string of high-profile regional mandates the team has executed so far this year.
In the months ahead, investment banking will be delivering from a strong deal pipeline, including at least one scheduled to close during the second quarter.
EFG Hermes has raised an aggregate $2 billion (Dh7.34 billion) in the last six months alone with $1.2 billion raised in the recent ACC IPO. The bank is involved in a number of fund raising deals. It rasied $40 million for National Holding, an Abu Dhabi based manufacturer and distributor of food-related items through a private placement.
In Egypt, the bank was involved in a $70 million placement secondary stake of GB Auto a leading Egyptian manufacturer and distributor of automobiles. The bank also recently advised a consortium of investors on the capital raising of $151 million and the acquisition of Millennium Offshore Services, which has operations in the Asia Pacific and GCC regions and North Africa.
In the UAE, the company was the co-lead arranger of the $291 million IPO of Emirates REIT, a Sharia-compliant investment trust.
The bank expects strong revival in fee income from M&A advisory, IPO and debt capital market issuances such as sukuk and conventional bonds.
“On all these three lines of business we see a strong pipeline of activity across the Gulf countries. We expect market activity to pick up in wider Mena region from the second half of this year,” said Halbouny.
EFG recently reported a substantial “pickup” in the company’s first quarter profits driven by cost-management and higher revenues from its core operations. The firm said net group profit soared three-fold to 119 million Egyptian pounds ($16.7 million; Dh60.94 million) while total operating revenues surged to 563 million Egyptian pounds ($79.2 million).
The company said these core operations enjoyed leading positions in Egypt and kept gaining market share during the period under review.
The investment bank’s operating revenue increased 27 per cent year-on-year to 246 million Egyptian pounds. Excluding the capital market activities, the core businesses of advisory, securities brokerage, asset management and private equity generated 46 per cent of their revenues from regional operations, with the remaining coming from operations in Egypt.
