The Egyptian Financial Supervisory Authority (EFSA) has cited lack of experience as the main reason for refusing to approve its year-old joint venture deal between Qatar’s QInvest and Egyptian investment bank EFG-Hermes, as stated in a press release Thursday.
EFSA said that EFG-Hermes Qatar LLC – a joint venture owned 60 percent by QInvest, 40 percent by EFG-Hermes, which targeted fully buying the latter’s main operations – did not meet the ‘experience requirements’ stipulated in the Egyptian Capital Market law.
"In light of the limited experience of the purchasing company and its lack of activity since its inception, it does not meet the legal requirements for acquiring subsidiaries of EFG-Hermes, one of the largest investment banks in Egypt," said the regulator.
The Qatari investment bank, founded in 2007, has an authorised capital of $1 billion and paid up capital of $750 million. According to the now defunct agreement, it sought to acquire majority stake in EFG Hermes, a Cairo-based leading investment bank in the Arab world, established in 1984.
On Wednesday, a joint statement by EFG Hermes and QInvest announced the expiry of the joint venture agreement due to EFSA's failure to grant the deal a "no-objection" endorsement after regulators in "all other markets in which the joint venture was initially to operate" approved it. These included Qatar, the United Arab Emirates, Saudi Arabia and Jordan.
The Egyptian investment bank, which was dealt a blow by the revolution, needed the $250 million injection from the deal. It will now cut costs to LE500 million ($72.11 million) in 2014 from LE780 million for 2013, it said in a release to the Egyptian exchange.
This article was amended to accurately reflect EFSA’s main reasons for rejecting the deal, which is EFG Hermes Qatar LLC's lack of experience, not QInvest's.