Bahrain-based Arab Banking Corporation (B.S.C. or Bank ABC) has acquired Egypt's unit by purchasing its entire 99.4 percent stake with a deal worth EGP 6.7 billion ($427 million), BLOM BANK 'SAL' announced in a statement on Sunday.
The acquisition agreement is waiting for the approvals of the Central Bank of Egypt (CBE) and the Central Bank of Lebanon, among other regulatory approvals in Egypt and Bahrain, according to the statement.
BLOM BANK will sell its stake to the ABC Bank by tendering its shares into a mandatory tender offer, that is to be launched by bank ABC to all shareholders of Blom Bank Egypt after obtaining and complying with all the mandatory regulatory approvals, including the approval of CBE and the Financial Regulatory Authority (FRA) in Egypt.
The closing of the transaction is expected to take place in the first half of 2021.
Chairman and General Manager of Blom Bank, Saad Azhari said that the acquisition will allow BLOM BANK to comply with the latest regulations issued by the Central Bank of Lebanon which stipulate that all Lebanese banks must raise their equity by 20 percent.
Meanwhile, Group CEO of ABC, Khaled Kawan stated that the acquisition of BLOM BANK Egypt is a unique opportunity for Bank ABC to fulfil its longstanding strategic commitment to inorganically expand its core business and that it gives the bank a significantly enhanced platform for future growth in one of the most attractive markets in the region.
“We have an active relationship with our regulators and will be working to secure their approvals to complete the deal as swiftly as possible. We will then look forward to working with our new BLOM Bank Egypt team to combine ABC Egypt and BLOM Egypt thereby creating a new powerhouse in the Egyptian banking sector," said Kawan.
BLOM BANK 'SAL' was advised by CI Capital, while Baker McKenzie acted as legal counsel.
Bank ABC (B.S.C.) was advised by HSBC, while Freshfields Bruckhaus Deringer and Zulficar and Partners acted as legal counsel of the agreement.
In August, CBE approved the start of the due diligence inspection process of Egypt’s unit of BLOM BANK, as an action to initiate its sale.
On the wake of the Lebanon port blast, that occurred on 4 August, BLOM BANK announced that it is considering strategic options including selling its unit, as well as a resolution issued by Lebanon’s central bank last November that requires Lebanese banks to raise their capitals.
According to BLOM BANK data, BLOM Egypt has the largest assets owned by the bank outside Lebanon and it’s a key source of the bank’s growth within the region and globally.
In February, BLOM BANK announced that there were negotiations to sell Egypt’s unit. However, the bank later said that it would continue to work in the Egyptian market despite Lebanon’s financial crisis, adding that the negotiations were just offers that were under consideration.
BLOM Egypt’s capital records EGP 2 billion over 42 branches in the country. The bank has branches in 12 countries around the world, also according to BLOM data.
According to the World Bank, for almost a year now Lebanon has been facing multiple crises; chiefly an economic and financial crisis; followed by COVID-19 and lastly the explosion at the port.
In October 2019, Lebanon’s economy stepped into a financial crisis brought about by a sudden stop in capital inflows, which precipitated systemic failures across the banking sector and debt sector.
Lebanon is expected to witness a -25 percent decline in its real GDP growth in 2021, according to the International Monetary Fund (IMF).