|
BANK OF ALEXANDRIA SOLD TO HIGHEST BIDDER
BY ABDEL AZIZ NOSSEIR
A dark horse has come out on top in the highly
contested race to purchase a majority stake in state-owned Bank
of Alexandria (BA). Italy’s Sanpaolo IMI Group won an auction
for an 80-percent stake in the bank on October 17, beating five
rival bidders: Egypt’s Commercial International Bank (CIB),
France’s BNP Paribas, a consortium of Jordan-based Arab Bank
Group and Saudi Arabia’s Arab National Bank, and a consortium
of Dubai-based Mashreq Bank and Dubai Investment Group. A sixth
contender, Greece’s EFG Eurobank, withdrew shortly before
the auction without making a bid.
Sanpaolo secured its 80-percent stake in BA with a $1.6 billion
(LE 9.2 billion) bid, topping the joint Jordanian-Saudi bid of $1.4
billion. A 15-percent stake in the bank will be floated on the stock
exchange at “an appropriate time,” while 5 percent will
be offered to BA’s employees, Minister of Investment Mahmoud
Mohieldin said.
According to Hatem Alaa, financial analyst at HC Securities Brokerage,
Sanpaolo’s winning bid far exceeded expectations. Most analysts
expected the stake sale to generate about $350 million (LE 2 billion),
close to the book value determined by Citigroup, the government’s
adviser on the deal. Alaa noted that the most recent mergers and
acquisitions in the Egyptian banking sector were at price-to-book
values ranging from from 1.1x to 3.6x. “So it is amazing that
this deal was executed at around 5.8x,” he said, citing the
figure published in the state-run Al-Ahram newspaper.
Established in 1957, Bank of Alexandria is Egypt’s third largest
state bank, with assets valued at $6.9 billion and about 6 percent
of banking sector deposits. It has 188 branches, 7,000 employees
and more than 2 million clients. According to Ministry of Finance
figures, over LE 8 billion was spent on the bank to prepare it for
privatization, including LE 6.9 billion to settle its non-performing
loans (NPLs) and LE 450 million on early retirement packages.
Sanpaolo IMI Group, meanwhile, is a leading Italian financial services
provider, with around 43,000 employees, 7 million customers and
branches in 34 countries. “Sanpaolo is a large bank with overwhelming
resources,” says Alaa. “It is one of the top banks in
the European region, a leading asset management company and the
third largest Italian insurance provider in terms of funds under
management.”
Among the bidders, Sanpaolo was the second largest in terms of total
assets, having assets worth approximately $336 billion. Only BNP
Paribas, with total assets of approximately $1.6 trillion, had more
resources, Alaa notes.
Still, Sanpaolo’s win came by surprise. The two Gulf consortiums
were heavy favorites to win because, even with less resources, they
had more incentive to invest in the Egyptian market and appeared
willing to bid higher. Angus Blair, head of research at Beltone
Financial, admits he had his money on the consortiums led by Arab
Bank and Mashreq Bank. “I have to admit Sanpaolo came out
of the blue,” he confesses.
Yet, he doesn’t feel Sanpaolo paid too much for the stake,
especially when the bank’s long-term strategy is considered.
“This [stake] gives a big and immediate entry for Sanpaolo
into Egypt, which otherwise would have taken years to buy into the
market,” he explains. The acquisition makes the Italian bank
the third largest bank in Egypt at a time when increasing access
to mortgage lending is expected to heat up the banking sector and
the economy along with it. “So maybe they’re paying
a lot at the moment, but the growth in the market should more than
compensate the price they have paid.”
According to Blair, Sanpaolo’s decision to enter the Egyptian
market is due to a “renaissance” in the Italian banking
sector. Until earlier this year, Italy’s banking market was
highly fragmented and its central bank in disarray, but now its
banks are actively seeking to consolidate and streamline the sector.
Sanpaolo is currently in a merger with another Italian bank, Bank
Intensa, which will give it around a 20-percent market share in
Italy and make it a key player in Europe. With things settling on
the home front, Blair says, the bank is now focusing on its growth
in other markets. It already has interests in a number of emerging
economies such as Romania, Albania and Slovenia, and is currently
eyeing assets in Serbia.
Sanpaolo will bring international experience to Egypt. Blair believes
this will be a positive development for BA’s 2 million clients.
“You will see a very quick improvement in services in Egypt
because Sanpaolo is a European bank and they are used to working
in a competitive environment,” he says. “In that respect,
I expect to see improvements in all levels of services, whether
in the retail part of the bank, Internet banking, call centers or
ATMs.”
Speaking at a press conference following the auction, Sanpaolo’s
general manager, Pietro Modiano, said the acquisition of Bank of
Alexandria marks his bank’s first step toward expansion in
the southern Mediterranean region. He declined to give details on
how Bank of Alexandria would be restructured or whether its workforce
would be trimmed. “It’s too early to talk about plans,”
he said. “We are here to strengthen the values of BA. A brand
name is part of the value, and so are the people.”
Submit
your comment
Top
|
