EFG-Hermes announced today that it has entered the highly promising Kuwaiti market through a strategic partnership with Kuwait Invest Holding Company whereby it has acquired an equity interest in Offset Holding KSC for approximately KWD 33.42 million (US$ 126 million).
Offset Holding KSC owns a 90% stake in Gulf Financial Brokerage Company, a top-ranked broker on the Kuwait Stock Exchange, which has a 26% market share in Kuwait and offers local and regional institutions both traditional and online operations.
Gulf Financial Brokerage Company had a market share of 26% during the second quarter of 2008 and net profit after tax of KWD 2.9 million (USD 11.1 million) during the first 6 months of 2008 reflecting a PE of 12.6 times based on annualized 6-months 2008 earnings.
Under the terms of the new agreement EFG-Hermes will assume management and operation of Offset Holding Company and Gulf Financial, which is currently slated to operate under the brand name EFG-Hermes IFA.
"We're delighted to announce that EFG-Hermes now has presence in Kuwait," says EFG-Hermes CEO Hassan Heikal. "Kuwait is the second-largest stock market in the region after Saudi Arabia with some US$ 600 million in trading every day. With no new brokerage licenses being offered for sale in Kuwait on the Kuwaiti market and no foreseeable change to the regulatory environment, there is substantial scarcity value in acquiring interests in a Kuwaiti brokerage firm. The deal gives us direct presence there and will allow us to directly execute transactions on behalf of our clients and grow our market share under the EFG-Hermes brand name."
Meanwhile, Kuwait Invest, a subsidiary of IFA Group has many investments including brokerage investments in Kuwait, Saudi Arabia, the UAE and Jordan.
"Kuwait Invest is very pleased to now be in business with EFG-Hermes," says Kuwait Invest Chairman and Managing Director Anas Al-Saleh. "The mix of our unrivaled local insight and dominant market position along with EFG-Hermes' regional reach will create new opportunities for Kuwaiti, regional and global investors alike and we are looking forward to further cooperation with EFG-Hermes in various fields"
According to EFG-Hermes CEO Yasser El-Mallawany, this latest acquisition falls in line with the company’s regional expansion strategy. “EFG-Hermes forms strategic relationships with only the best local players. We already account for substantial equity trading flows into the Kuwaiti market, largely on behalf of institutional investors. Through the Gulf Financial deal, EFG-Hermes will now execute directly for its clients, who are attracted to the Kuwaiti market and its strong fundamentals, diverse offerings and the absence of foreign ownership restrictions," he explains.
The move into Kuwait is EFG-Hermes' second acquisition in the Gulf this year. In April 2008, the firm purchased a 51% interest in Vision Securities Co., a leading Omani broker, in a deal worth US$ 15.3 million.
EFG-Hermes now has operations in Egypt, the United Arab Emirates, the Kingdom of Saudi Arabia, Qatar, Lebanon, Oman and Kuwait.