Mubasher: The decision taken by EFG-Hermes Holding to sell its equity in Credit Libanais Bank is “positive”, said MubasherTrade Research (MTR).
EFG Hermes said Thursday its board of directors gave the go-ahead to selling its 63.7% stake owned in Credit Libanais Bank.
EFG Hermes is currently working on securing the approvals of the Lebanese central bank to proceed with selling a 40% stake, or 9.408 million shares in the bank at $33 each. Meanwhile, EFG Hermes entered into an irrevocable underwriting agreement to sell its remaining, indirectly-owned 23.7% stake, or 5.506 million shares in Credit Libanais Bank at $181.7 million. The deal is expected to be finalised by the end of May, 2017.
“We note that the selling price of USD33/share implies a P/BV of 0.94x or a 21% premium to the market implied P/BV of Lebanese listed banks (average of 0.78x) -- both based on September 2015 book values. However, the deal in USD terms is 15% below the price HRHO had paid for the stake back in 2010 (USD577.8mn or USD38.7/share). The premium implied by the deal's multiple versus peer banks in Lebanon translates into an upside of 9% to EFG's pre-announcement closing share price; which implies a value of EGP10.33/share,” said MTR.
MTR also estimates that EFG will recognize an after-tax gain of around EGP756 million after completing the deal. On the other hand, it estimate that EFG-Hermes will eventually net a cash payment equivalent to EGP4.1 billion or EGP6.7/share, net of a capital gains tax in Egypt.
“Overall, we believe this decision is positive for HRHO on two fronts: (1) it unlocks the value of its commercial bank unit and (2) it provides the franchise with ammunition to benefit off today's market low prices. Although not announced by HRHO's management, we believe the net cash generated from the deal can be channeled to distribute special dividends, seek new acquisition targets, or buy back shares. While we believe the market has priced in this value-accretive deal, it probably has not reflected yet the potential return from utilizing the sale proceeds,” said MTR.
