Investment Banking

EFG Hermes Investment Banking has expanded its reach, product offerings, and capabilities to execute a record number of ECM, M&A and DCM transactions across an ever-growing footprint in 2018

key facts

  • USD 1.54 billion ECM transactions in FY18
  • USD 316.5 million M&A transactions in FY18
  • USD 670 million DCM transactions in FY18
  • USD 2.5 billion aggregate value of transactions in FY18

Overview

EFG Hermes’ Investment Banking division is a regional leader in M&A advisory, equity capital market (ECM) executions, and debt capital market (DCM) capabilities. Throughout the years, it has continued to execute a steadily expanding stream of landmark transactions not only in the MENA region but throughout the firm’s ever-evolving footprint by leveraging unique deal-sourcing efforts and an ability manage and place multiple simultaneous transactions. The division’s ability to adapt its strategies, on-the-ground knowledge of regional market dynamics, and capacity to devise and execute innovative and customized solutions for clients allow it to deliver unmatched value.

EFG Hermes Investment Banking has throughout the years been the institution of choice for clients, driven by the team’s exceptional domestic and international execution capabilities in the M&A sphere, extensive experience in a broad range of industries, jurisdictions, and products and its ability to respond with market judgments and ingenuity to clients’ needs for capital. It is these qualities that have helped the division see a record-breaking year, booking an aggregate USD 2.5 billion in transactions in 2018.

Backed by a highly qualified team made up of some of the most diverse investment banking professionals in the region, the division managed in 2018 to go beyond plain vanilla advisory work in its home market, going on to bolster its product offerings, expand its execution capabilities and widen its footprint despite operating in a geopolitical climate in constant flux. The successful deployment of this strategy has not only created significant value for shareholders, but was the lynch-pin of EFG Hermes Investment Banking’s success during the year.

Operational Highlights of 2018

2018 was an incredibly successful year for EFG Hermes Investment Banking despite challenging conditions that plagued most emerging markets. The division generated revenues of EGP 364 million, an 8% y-o-y increase from an already record-breaking 2017. During the year, the effort and resources invested into increasing the division’s execution capabilities began to bear fruit, with EFG Hermes Investment Banking executing 19 equity capital market, M&A, and debt transactions during the year for an aggregate value of USD 2.5 billion.

The division’s strategy, which targeted improving efficiency, building wider strategic networks and developing greater capabilities to serve investment banking clients enabled the team to close 6 DCM transactions at a value of USD 670 million, USD 1.54 billion for 8 ECM transactions and USD 316.5 million covering 5 M&A deals. These successes culminated in several nods from prestigious institution, with the division being named Best African Investment Bank from Africa Investor and Best Investment Bank in Egypt by Euromoney Middle East Awards.

In July 2018, EFG Hermes Investment Banking concluded its first successful transaction in frontier emerging markets. The Firm served as a joint bookrunner for microlender ASA International’s (ASAI) GBP 125.2 million IPO on the LSE. The offering, which was 1.9x oversubscribed, was the first ever offering by a frontier microfinance institution on a European exchange.

In an effort to expand its GCC presence, EFG Hermes Investment Banking successfully acted as sole bookrunner on the USD 226 million accelerated equity offering of Humansoft Holding Company on the Boursa Kuwait, advising Al Othman Commercial Enterprises on the 17% stake sale. Al Othman’s stake in Humansoft represented the largest accelerated equity offering in the Middle East and North Africa and among the top 10 in Emerging EMEA in 2018. The offering was 1.48x oversubscribed

In Oman, the division also acted as sole global coordinator on the USD 52 million IPO of Dhofar Generating Company on the Muscat Securities Market. It also facilitated the USD 52 million accelerated equity offering of Abraaj’s stake in Orascom Construction on NASDAQ Dubai.

Despite challenging conditions in its home market, the team concluded the USD 70 million IPO of Cairo for Investment and Real Estate Development (CIRA), the first offering of an educational platform on the EGX. The division acted as sole global coordinator and bookrunner on the transaction, with the institutional component of the IPO being 10.36x oversubscribed and the retail tranche 18.9x oversubscribed. The execution followed the successful facilitation of a USD 40 million debt facility for CIRA, which combined underscore the team’s ability to leverage debt opportunities available through its merchant banking division and debt raising capabilities to provide clients with value accretive solutions.

In the M&A space, the division served as sell-side advisor to Waha Capital on the USD 49 million sale of its outstanding equity capital in Proficiency Healthcare Diagnostics Laboratories. In the second half of the year, EFG Hermes Investment Banking acted as sell-side advisor to Suez Cement Group Companies, a subsidiary of Heidelberg Cement, on the sale of its industrial bags manufacturing plant to Mondi Industrial Bags for a total consideration of USD 16 million. It also acted as buy side advisor to Telecom Egypt in its USD 90 million acquisition of MENA Cables.

The division completed a number of debt transactions in numerous geographies this year. Continuing its longstanding relationship with ADES International Holding beginning with its 2017 IPO (for which the division won the title of Best IPO in the Middle East by EMEA Finance – Middle East Banking Awards 2018), the division acted as lead arranger to secure ADES a USD 450 million medium-term syndicated credit facility and provided advisory on a USD 140 million debt facility for the company later in the year. It also acted as lead arranger on USD 18 million worth of loans for Al Hokair Group’s Marakez for Real Estate Investment, a continuation of its strategy to expand presence in the GCC.

2019 Outlook

In recent years, EFG Hermes Investment Banking division has significantly expanded both its product offering and geographical 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 solidifying its position in existing markets while persisting our venture into frontier markets and, with our expanded reach, insight, and capabilities, capitalize on their considerable upside potential.

Going forward, we are optimistic about opportunities in Egypt and plan to increase our deal count in our home market as it becomes comparatively more attractive in the region. We expect potential deal sizes to grow along with the number of smaller offerings. In the GCC, we will continue to adapt our business model in response to changing market dynamics and offer new and diverse products, including entering into transactable businesses that will help maintain a healthy pipeline of regional deals.

Landmark Deals in 2018

EFG Hermes continued to expand its presence in new and existing markets, completing several landmark deals across the key FEMs.

ASA International Group – joint bookrunner for ASA International’s USD 181 million IPO on the LSE, the first ever offering by a frontier microfinance institution on a European exchange.

Cairo for Investment and Real Estate Development (CIRA) – concluded CIRA’s USD 70 million IPO, the first international offering of an educational platform on the EGX.

Dhofar Generating Company – sole global coordinator on the USD 52 million IPO of Dhofar Generating Company on the Muscat Securities Market.

Humansoft Holding Company – sole bookrunner on the USD 226 million accelerated book build of Humansoft Holding Company.

Orascom Construction – bookrunner in the USD 52 million accelerated book build of Abraaj’s stake in Orascom Construction on NASDAQ Dubai.

Cleopatra Hospitals Group – completed a USD 40 million rights issue for Cleopatra Hospitals Group.

Orange Egypt – completed a USD 870 million rights issue for Orange Egypt.

Waha Capital – sell-side advisor to Waha Capital on the USD 49 million sale of its outstanding equity capital in PHD Diagnostics.

TMG Holding – sell-side advisor to TMG Holding on the USD 58 million sale of its portfolio of four schools.

Suez Cement Group Companies – sell-side advisor to Suez Cement Group Companies on the USD 16 million sale of its industrial bags manufacturing plant to Mondi Industrial Bags.

Social Impact Capital – lead arranger in the USD 22.5 million acquisition finance facility for Social Impact Capital.

ADES International Holding – raised USD 590 million through a syndicated debt facility and an Islamic stand-by facility.

Marakez – lead arranger on USD 18 million worth of loans for Al Hokair Group’s Marakez for Real Estate Investment.

Key Financial Highlights of 2018

EFG Hermes Investment Banking contributed to c.12% of EFG Hermes’ total revenue from fees and commissions in 2018. The division saw total revenues EGP 364 million in FY18, up 8% versus the FY17 figure of EGP 336 million.