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AGGRESSIVE EXPANSION

QNB picks JP Morgan for Egypt buy

Paris, September 3, 2012

Qatar National Bank (QNB), the state lender seeking to boost its regional presence through acquisitions, has hired JP Morgan Chase to advise on its planned buy of Societe Generale's Egyptian arm, three sources said.

SocGen is in early talks with QNB to sell its 77.2-per cent stake in National Societe Generale Bank - the Egyptian lender which has a market value of around $2.3 billion - as the French bank seeks to shore up its capital through divestments.

'The talks are initial but they definitely have the firepower for an asset of that size. JP Morgan is assisting QNB on the deal,' one of the sources said.

SocGen, which recently sold fund management unit TCW, is being advised by US bank Morgan Stanley on the transaction, a second source said.

Discussions with SocGen are at an early stage and subject to a due diligence process, QNB said in a statement on Thursday.

QNB was not available for comment when contacted by Reuters. The bank did not respond to several calls and emails seeking comment.

If an agreement is reached between the Qatari and French banks, QNB may be forced into a mandatory offer to minority shareholders which would see them acquire the entire bank, a note from Egypt-based investment bank EFG Hermes said.

A full takeover would likely cost QNB between 15.9 billion and 18 billion Egyptian pounds ($2.61-$2.95 billion), the note added.

NSGB, which operates around 160 branches across the North African country, is one of the largest banks operating in Egypt and has assets of around $10.5 billion. It also offers private banking and investment banking services in Egypt.

NSGB shares rose 10 percent on the Egypt bourse on Sunday, the first day of trading after QNB announced its interest.

The bank commands a higher valuation than some of its peers, trading at around 1.9 times its book value.

However, EFG Hermes said QNB may need to offer 2.2-2.5 times the bank's book value to secure a deal, implying a transaction value of 12.3-13.9 billion pounds for SocGen's stake.

'It's one of the trophy assets on the banking space in Egypt. The central bank in the country does not give out banking licences easily and for lenders like QNB who are looking to expand, acquisition is the best option,' the second source said.

QNB, one of the largest Gulf banks which is 50-per cent owned by Qatar's sovereign wealth fund, is keen to expand its footprint in the region and has been snapping up assets at a rapid pace.

On Thursday, the bank said it raised its stake in Commercial Bank International to 39.9 per cent from 16.5 per cent. It also raised its stake in Iraq's Mansour Bank and bought a 49 per cent stake in Libya's Bank of Commerce and Development earlier in April.

However, the lender is known to be aggressive on price and lost out to Russia's Sberbank in bids for Turkey's Denizbank earlier this year.

On the other hand, French lenders are shedding non-core assets globally and assets in Egypt are seen as ripe candidates for divestment.

BNP Paribas, another French lender, is said to be seeking initial bids for the sale of its Egyptian retail arm, expected to generate between $400 million to $500 million, with QNB interested in the business, sources said last month.

'They may bid for both and try to get the best price out. They certainly won't be allowed to buy both by the Egyptian central bank,' a second banking source said.

Credit Agricole also owns 60-per cent of Credit Agricole Egypt and operates a retail, corporate and private banking business in the country.-Reuters




Tags: Stake | Qatar National Bank | acquisitions | Société Générale | JP Morgan Chase |

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