Egyptian investment bank buys shares in British stockbroker and bank

Adam El-Gammal
For Al-Shorfa.com
2008-09-20

Lebanese Economy and Trade Minister Sami Hadad and Egyptian Investment Minister Mahmoud Mohieldin attend the Arab Economic Forum (Joseph Barrak/AFP/Getty Images).

In an unprecedented move, Egypt’s largest investment bank, EFG-Hermes, announced on August 18, 2008 that it had acquired almost 10 percent of Panmure Gordon Bank’s shares, some 6.7 million new shares at 47 pence ($0.82) each.

EFG-Hermes would hold a 9.06 percent stake in the voting rights in Panmure Gordon after the completion of the capital increase.

Established in Egypt in 1984, EFG-Hermes, which is based in both Egypt and Dubai, specialises in investment banking, asset management and private equity as well as securities brokerage and research.

An aerial view of Tower Bridge (L) and the "Square Mile" financial district are pictured from the "Stella Artois: Star Over London" Zeppelin in central London (Leon Neal/AFP/Getty Images)

In June 2008, the company had a market capitalisation of more than $3.5 billion, and $7.7 billion under management. EFG-Hermes’ clients include governments, corporations and individual investors.

This is the first venture a Middle Eastern bank has made into the British financial market, and one of several acquisitions that EFG-Hermes has made in 2008, having expanded its business throughout the Gulf and even partnered with banks in Singapore and South Korea. According to an August 18, 2008 article in the Financial Times, the investment comes at a time when more foreign investors, including Indian and Asian groups, are entering the sharply depressed UK stock-brokerage sector, looking for good deals and access to the UK listings market.

Both companies consider the deal to be a significant cross-marketing opportunity, giving each company the opportunity to access the other’s customer base and create new business streams.

Panmure Gordon, which has approximately 280 employees, was founded in 1876 as an independent mid-cap investment bank and has been in operation for 130 years.

The company was forced to cut costs and lay off staff in the first part of 2008 to cope with the fall in new issues and the slower stock-brokering market.

“The markets we operate in are becoming more international, and the opportunities available through a business relationship with EFG-Hermes are compelling,” said Panmure chairman Tony Caplin in a company statement, adding that his company’s access to EFG-Hermes was an exciting opportunity and a major competitive advantage.

“There is turmoil in the markets, and we can’t just rely on our traditional clients,” Panmure’s chief executive Tim Linacre told the UK daily The Independent in an August 19, 2008 article. “To be a significant player, we felt we needed operations in the Gulf.”

He also did not rule out more tie-ups in the future.

“We need more exposure to growth markets around the world,” Linacre said.

Jeremy Grime, a financial services analyst with Arden Partners, told the Financial Times that the EFG-Panmure acquisition reflected a fundamental change in the investment market.

“It’s another example of small and mid-cap brokers looking for another area to exploit,” Grime said.

EFG-Hermes Chairman Hassan Heikel stated that the Panmure Gordon purchase would strengthen the company’s strategy to service its Middle Eastern client base.

“The announcement is further testament to the growing importance of the regional markets on the global investment stage, and EFG-Hermes’ position at the forefront of this development,” Heikel explained in a company statement.

EFG-Hermes has had a big year. In April 2008, it acquired a leading Omani broker for $15.3 million, and then followed in August by acquiring an equity interest in a leading Kuwaiti investment bank for $126 million.

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