Samba Financial Group and Standard Chartered Bank are front-runners in the bidding for a 67 per cent stake in Egypt’s third-largest finance house, Banque du Caire.
Sources close to the sale say the two banks are considered to be the best candidates by the state-owned Banque Misr, which owns Banque du Caire.
In total, five banks were invited to conduct due diligence on Banque du Caire before tabling final bids, which are expected in April.
“Samba and Standard Chartered are considered to be the two banks that have the balance sheet and the experience to complete this acquisition,” says one Egyptian banking source. “Both are eager to enter the Egyptian market.”
Other contenders include National Bank of Greece, the UAE’s Mashreqbank and a consortium involving Jordan’s Arab Bank and Saudi Arabia’s Arab National Bank.
“The real competition is between Standard Chartered and Samba,” agrees Monsef Morsy, bank analyst at Pharos Holding, a Cairo-based investment bank.
There are historic ties between Samba and Banque du Caire, which could benefit the Saudi bidder. Banque du Caire sold a $348m stake in Samba in 2006, as part of its efforts to restructure its foreign investments and settle some of its non-performing loans.
But while Samba is positioned well for the deal, some observers say its size could be a stumbling block for the finance house. One Saudi banker tells MEED the Central Bank of Egypt, as financial market regulator, could view Samba as too small to absorb Banque du Caire.
“I would be surprised if Samba, which is a bank of only about 2,500 employees, can successfully acquire a bank with staff of around 8,000,” says the source.
Local analysts expect the amount paid for Banque du Caire to exceed the $1.6bn paid by the Italian bank Sanpaulo IMI in November 2006 for Bank of Alexandria, which is Egypt’s fourth largest bank.
The Jordan-Saudi consortium previously missed out on the acquisition of Bank of Alexandria, as did Mashreqbank, which has since said it plans to expand organically in Egypt because of its failure to complete an acquisition in the country.
The Egyptian government had originally planned to merge Banque Misr and Banque du Caire, but abandoned the plans because of the significant overlap between the two and the more lucrative opportunity to sell the bank to new owners.
Whichever bank succeeds in purchasing Banque du Caire, it will have to make major additional investments to transform what is widely considered to be an underperforming institution.
“A lot of work needs to be done transforming Banque de Caire,” says Morsy. “It will take substantial additional investments and could take well over a year.”
Samba would not comment on the acquisition. Standard Chartered and Banque Misr were unavailable for comment.
In 2007, JP Morgan was selected as adviser on the sale of the bank. Alongside the 67 per cent being sold in the current process, Cairo plans to sell an additional 28 per cent through an initial public offering of shares, while 5 per cent will be distributed among the bank’s staff (MEED 3:12:07).