Al Ahli Bank of Kuwait K.S.C.P (“ABK”) announced today that it has entered into a definitive agreement with Piraeus Bank S.A (“PB”) to acquire 98.5% of Piraeus Bank Egypt (PBE) shares, subject to obtaining all the required regulatory approvals from the competent authorities, including in particular the Central Bank of Kuwait and the Central Bank of Egypt. The signing of this agreement marks the successful conclusion of the negotiations between ABK and PB with regards to the transaction and due diligence process as approved by the Central Bank of Egypt. Total consideration is equivalent to US$150mm for PB’s stake representing a multiple to the stated tangible book value of PBE as of March 31, 2015 of 1.4x. The closing of the transaction is expected to take place before the end of 2015.
ABK’s acquisition of Piraeus Bank Egypt realizes ABK’s regional vision with regards to Egypt being a key focus market offering opportunities for sustainable growth, business profile diversification, and effective capital deployment. This lies within the context of a well regulated and underpenetrated banking market providing significant growth opportunities, further supported by the country’s attractive macro-economic fundamentals and robust population dynamics boasting a young population of 85 million with a vibrant middle class. PBE represented an ideal strategic fit for ABK’s strategic vision from several dimensions, including its universal banking model with focus on wholesale products as well as growing retail offering, visible presence in the Egyptian banking market via 39 branches in key population centers, easily scalable system infrastructure supporting further market share increases, adequate capitalization with c.14% capital adequacy ratio and highly liquid balance sheet with c.56% loans/deposits ratio as at the end of March 31, 2015.
Following the consummation of the transaction, ABK shall become the second Kuwaiti bank to operate in Egypt and its entry shall provide it with ample opportunities to capture the deep relationship between the two countries both on the government level but also on the private sector level. Significant number of Egyptian nationals employed in Kuwait shall also enable ABK to build best-in-class remittances services and to sustain a clear channel for growing retail banking in both Kuwait and Egypt. Post transaction, Egypt will be the second foreign market of ABK in addition to UAE, where ABK has two overseas branches in Dubai and Abu-Dhabi providing services to Kuwaiti and Gulf-based Arab producers and exporters.
Talal Mohammed Reda Behbehani, ABK’s Chairman, emphasized ABK’s aspirations, as a leading Kuwaiti bank, to advance the fortress relationship, trade links and financial integration between Kuwait and Egypt, citing that “We are delighted with this transformative transaction opening a new chapter in ABK’s international strategy providing us significant footprint in one of the largest and fast-growing markets in the MENA region in addition to our existing stronghold in Kuwait and UAE.”
Michel Accad, ABK’s Chief Executive Officer, expressed his confidence in the growth potential that the Egyptian market promises, stating that “ABK’s acquisition of Piraeus Bank Egypt marks a milestone in ABK’s strategy to use its robust balance sheet and capital resources for international expansion. This acquisition helps ABK diversify its business profile and allows it to benefit from increased regional connectivity, providing us with the opportunity to apply our management expertise to help Piraeus Bank Egypt further grow and develop. I would like to express my thanks to the authorities and all our colleagues and associates at both banks for their hard work and generous spirit of cooperation in making this agreement a reality.”
ABK has been advised by J.P. Morgan as its exclusive financial advisor on the acquisition of PBE, while Ernst & Young acted as transaction and tax advisors and Zulficar & Partners acted as legal advisors.
Established in 1967, ABK is a leading commercial and retail bank in Kuwait with market capitalization in excess of US$2.0bn, total assets of US$11.9bn, net loans of US$8.3bn, and customer deposits of US$6.6bn as of December 31, 2014. ABK’s shareholders’ equity stood at US$1.9bn, allowing it to maintain a strong capital position with a Core Tier I ratio of 22.7%, well above the capital ratios of most Middle Eastern financial institutions. Following the consummation of the transaction, ABK’s international operations in UAE and Egypt are expected to account for c. 18% of its total consolidated assets compared with c.5% as of December 31, 2014. ABK is recognized with investment grade ratings of A+ and A2 assigned by Fitch and Moody’s, respectively.
Piraeus Bank Egypt
Piraeus Bank Egypt was founded in 1978 initially under the name of Alexandria Kuwait International Bank and in 1997 renamed as Egyptian Commercial Bank. Following a capital increase of EGP 500mm in May 2005, Piraeus Bank acquired 87.9% of the bank’s shares and changed the bank’s name to Piraeus Bank Egypt. In 2014, Piraeus Bank increased its stake to the current level of 98.5%. PBE provides services to its customers in corporate banking, retail banking, treasury and leasing through its subsidiary. It operates through its 39 branches, internet banking, and its call center infrastructure, with a total of 915 employees as of December 2014. Following PB’s restructuring efforts, PBE registered positive net income of US$ 2.8mm and US$ 2.2 million in FY 2014 and Q1 2015, respectively. PBE boasts total assets US$1.3bn, net loans of US$0.6bn, and customer deposits of US$1.1bn, while its tangible book value stood at US$ 108 million as of March 31, 2015.
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