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More Gulf investors are reportedly interested in Palm Hills: Unnamed Saudi investors are mulling the acquisition of Arab African International Bank’s (AAIB) 12.9% stake in EGX-listed Palm Hills Developments (PHD) as the bank looks to exit the high-profile real estate developer, sources familiar with the matter are quoted as telling Al Mal.
Market reax: Palm Hills shares gained 0.4% yesterday to close at EGP 1.87.
This is not the first offer AAIB has reportedly fielded from the Gulf: AAIB was looking to sell its entire stake in PHD to Emirati investment company Al Ain Holding, Asharq Business reported in February. We haven’t heard anything on Al Ain’s offer since.
Why would AAIB exit? The bank hasn’t publicly confirmed it wants to sell its stake in PHD, but a sale makes sense when you consider AAIB is on the state’s list of 32 companies earmarked for sale under the rebooted privatization program. Divesting the AAIB stake would make the bank simpler to value. The bank, one of three on the sale list, is owned by the Central Bank of Egypt and the Kuwaiti sovereign wealth fund.
The exit strategy: AAIB is reportedly aiming to sell its shares in PHD at EGP 2.50-3.00 apiece, a price that would roughly equal in USD terms what it paid to acquire the stake nearly three years ago. The bank entered PHD in July 2020, purchasing a 12.25% stake (381.9 mn shares) at an average price of EGP 1.43 each from UPP Capital Investment. AAIB’s target sale price accounts for the devaluation of the EGP, which has lost almost half of its value since the first devaluation last March.
AAIB wants above market price: The offer represents a 34-61% premium to PHD’s share price of EGP 1.86 at market close on Tuesday. PHD shares’ most recent peak was EGP 2.30 at the end of January.
PHD’s shareholder structure: AAIB is Palm Hills’ second-largest shareholder after the company’s founding Mansour family, which collectively owns around 49%. The remaining stake is divided among minority shareholders and freefloat shares on the EGX.
Gulf investors are eyeing our real estate sector: The UAE’s Aldar and ADQ together acquired more than 85% of upmarket real estate developer SODIC in late 2021.
