UAE’s Chimera offers mandatory purchase to acquire the Egyptian Beltone

The UAE company, Chimera Investment, intends to submit a mandatory purchase offer to acquire 51% to 90% of the Egyptian Beltone Financial Company shares.

The Egyptian Financial Supervisory Authority said that the Chimera Investment Company submitted a non-binding mandatory purchase offer on the shares of Beltone Financial Holding Company to acquire a percentage between 51% and 90% at an initial price of 1,485 pounds per share of Beltone’s capital. The authority added a statement (which we obtained a copy of) that decided to submit the final offer as soon as it got the relevant internal and administrative approvals from the concerned authorities inside Egypt and the UAE. According to Bloomberg, the Emirati Chimera is competing with the alliance of WM Consulting, which is seeking to acquire Beltone for 1.35 pounds per share.

Beltone Financial Holding is one of the largest financial institutions in Egypt. It has about 18 companies specialising in investment activity, asset management, securities and IPO coverage, with a capital of 891.3 million pounds distributed over 445.6 million shares, with a nominal value of two pounds per share. Beltone, an Egyptian joint-stock company, was created in May 2006, and its shares were listed on the stock exchange in April 2008. The company’s main activity is working as an investment bank in Egypt and the Middle East. The company provides financial and investment banking services and brokerage in securities.

The Financial Supervisory Authority had said in statements early last week that Beltone Financial Holding Company had received a letter from WM Consulting Company in alliance with strategic investors, announcing its intention to submit a non-binding, mandatory purchase offer on Beltone Financial shares. A statement from the company explained that the offer included the acquisition of no less than 51% of Beltone Holding shares and no more than 90% at an initial price of 1.35 pounds per share, adding that the offered price is can change considering the study of financial, tax, legal and technical matters and that the company studies the offer. Earlier last week, the Financial Supervisory Authority had said that Beltone Financial Holding Company had received a letter from WM Consulting, in alliance with strategic investors, announcing its intention to submit a non-binding, mandatory purchase offer on Beltone Financial shares.

The financial statements of Beltone Financial Holding revealed the company’s results during the first quarter of this year, recording profits of 3.835 million pounds from January to the end of last March, compared to 3.803 million pounds for the same period. An independent financial statements, the company’s losses fell to 18 million pounds, compared to 22 million pounds, while it achieved revenues by about 10 million, compared to 4.7 million pounds. The consolidated financial statements of Beltone Financial Holding Company during 2021 showed an increase in its losses of 28.19%, recording 169.76 million pounds in 2021, compared to 132.42 million pounds in 2020, taking into account minority rights. The company recorded revenues of 64 million pounds, compared to 39 million during the comparison period. The company’s revenues rose to 351.68 million pounds at the end of last December, compared to 276.71 million in 2020. At the level of independent businesses, the company’s losses amounted to 66.33 million pounds last year, compared to 161.19 million the previous year.

It is worth noting that the Egyptian businessman Naguib Sawiris acquired through Orascom Telecom in 2015, which changed its name after dividing the company into Orascom Financial Holding, with Act Finance on Beltone Financial shares in a deal that amounted to 650 million pounds at the time at 4 pounds per share. Egypt received quick Gulf support after it announced the interest rate hike and left its pound to be flexible against the dollar at the end of last March, as Saudi Arabia deposited $5 billion in the Central Bank of Egypt at the end of last March The Saudi Public Investment Fund is looking forward to potential investments of $10 billion in health care, education, agriculture and finance sectors, while ADQ Holding, one of Abu Dhabi’s sovereign funds, has bought stakes of about $2 billion in Egyptian state-owned companies listed on the stock exchange, the holding has also set up a $10 billion fund targeting projects in Egypt and Jordan. Qatar pledged to pump $5 billion in investments in Egypt.

Egypt suffers from a shortage of foreign currencies combined with the of tourists, and with foreign investors withdrawing billions of dollars from the Egyptian bond market, foreign investments in Egyptian debt instruments fell to 28.8 billion dollars in December 2021 from 34.1 billion dollars in September, according to the latest official data. Experts confirm that there is a state of resentment in the street because of inflation and that the hot money since its exit has not yet returned to the required form.

Inflation accelerated

Experts expected inflation to accelerate further over the next few months, reaching a peak of 16-17% in August. Inflation increased in Egyptian cities under pressure from the rise of oils, grains and vegetable prices to a record 13.5% in May on an annual basis, compared to 13.1% in April and every month; Inflation fell by 1.1% in May from 3.3% in April. In recent months, inflation figures in Egypt have exceeded the target set by the Central Bank of Egypt of 7% (by an increase of two percentage points or less) until the end of 2022. Inflation in Egypt had jumped after the state liberalised the pound’s exchange rate at the end of 2016. The price of the Egyptian pound fell at the end of last week to 18.72 against the dollar, down about 20% since last March, its lowest level since February 2017. At the same time, the Central Bank of Egypt’s cash reserve contracted by $1.63 billion last May to $35.49 billion, also the lowest level since 2017.

The Central Bank of Egypt, at its fourth meeting in 2022 on Thursday, June 23, is preparing to set interest rates to control current inflation. The Central Bank of Egypt, at an extraordinary meeting in March, raised interest rates by 1% (100 basis points) to absorb the wave of inflation and to attract foreign investments in dollars for public debt instruments after billions of dollars came out following the Russian-Ukrainian crisis. Then, in May, it raised interest rates by 2% (200 basis points) to contain inflationary pressures.

The interest rates in Egypt are among the highest in the world. It amounts to one-night deposits and one-night lending, and the paramount transaction price is 11.25%, 12.25%, and 11.75%, respectively. The Central Bank of Egypt has four monetary policy meetings left during the year’s second half, the first of which is on August 18, then September 22, and November 3, and the last is on December 22. According to financial experts, the central bank does not need to take any action towards raising interest rates, as the recent rises have not all been reflected on the market yet, especially on inflation. We expect prices to stabilise at Thursday’s meeting, but they may need to rise during the second half of the year by about 200 basis points.