Valu is on the runway to make its EGX debut this summer… Regional financial services giant EFG Holding has gotten preliminary approval from the Financial Regulatory Authority to restructure its ownership of consumer finance platform Valu ahead of the fintech player’s hotly anticipated EGX debut, according to a statement (pdf) from EFG Holding and another (pdf) from the FRA. The fintech player could see its shares trading on the EGX as early as this June.

…and every shareholder of EFG Holding will get a piece of the action: Each EFG Holding shareholder as of a to-be-set date will receive shares of U Consumer Finance, which owns and operates the Valu brand, before the company makes its trading debut. U Consumer Finance will list on the EGX without a formal initial public offering of shares. It’s a unique transaction structure — one that finance nerds like us will be geeking out over for months to come.

EFG Holding shareholders are in line for a windfall worth north of USD 63 mn. U is valued at EGP 15.6 bn (c. USD 310 mn at today’s rate of exchange), according to a report by independent financial advisor BDO Keys Financial Consulting. EFG Holding is distributing U shares representing about 20.5% of the company, valuing the transaction at roughly EGP 3.2 bn (c. USD 63.2 mn).

How’s all this going to work? The transaction mechanics are pretty elegant:

  • U is held by EFG Finance, a unit of EFG Holding;
  • The firm will transfer a 20.5% stake in U directly to EFG Holding;
  • EFG Holding will then distribute the stake to its shareholders as a dividend in lieu of conventional cash-payout for 2024. Shareholders will get U shares on a pro-rata basis — in proportion to their current ownership of EFG Holding. The move is pending the green light from EFG’s general assembly.
  • U will make its EGX debut at the same time as the shares are granted to EFG Holding shareholders.

The dividend is almost as good as cash — and a lot more exciting. While EFG Holding shareholders will receive their dividends in the form of U shares, the shares will be immediately admitted to trading on the EGX. That will mean shareholders have the same-day option of selling their shares (we expect both domestic and foreign institutional interest to be significant) for cash with no lock-up period — or sticking with the Valu story for the long term as the company looks to grow at home and abroad.

Could this be Amazon’s cue to buy in? Amazon acquired USD 10 mn worth of EFG Holding’s London-listed global depositary receipts (GDRs) in 2022, with the option to convert them into a 4.255% stake in Valu’s parent company at its USD 235 mn valuation at the time. That suggests U’s valuation has risen north of 30% since the transaction date based on the fair value calculated by BDO Keys. The conversion was said to be contingent on a third-party investment in Valu through a sale, IPO, or other liquidity event, which Valu CEO Walid Hassouna confirmed yesterday in an interview with Al Arabiya (watch: runtime: 7:46).

EFG Holding will remain the controlling shareholder of U Consumer Finance, keeping an effective 67% stake.

Taking Valu public this way allows EFG Holding to create significant future upside for its shareholders — and to do so without a messy argument over valuation at a time when new paper on the EGX has been scarce.

REMEMBER- Valu holds a good chunk of the market: Founded in 2017, the consumer finance company holds a 24% market share in Egypt, having financed some 7.8 mn transactions since its inception.

ADVISORS- EFG Hermes is quarterbacking the transaction as the sole financial advisor and manager and while our friends at Zulficar & Partners are legal counsel.

Market reax: EFG Holding’s EGX shares closed down a hair over 1% yesterday. That mirrors the market: The benchmark EGX 30 closed down nearly 1% for the day.

KARIM AWAD GAVE US THE INSIDE STORY

We spoke yesterday morning with EFG Holding Group CEO Karim Awad about the transaction. Excerpts from our conversation:

EnterpriseAM: What was behind your decision to move forward with the transaction?

Karim Awad: We continue to feel that the market is not assigning a proper valuation to our share price, particularly for some of the businesses we’ve built over the past decade. The primary example of this is Valu. Valu has evolved from a startup into a household name. It is growing at significant year-on-year rates, yet the market still does not seem to fully understand that. We explored different options to redress this issue and concluded that the best course of action is to distribute Valu shares to our shareholders rather than selling to third parties.

The company is now at a stage where it still has strong growth potential but is already profitable, has a solid management team in place, and is effectively ready to enter the market.

E: What does the transaction look like beyond the distribution of the dividend to shareholders? Are you considering bringing in institutional investors?

KA: Once Valu shares start trading, all EFG shareholders will automatically be shareholders in Valu’s parent company. As trading begins, shares will change hands on the market. Until then, we will take two key steps to build momentum:

  • We’ll conduct a domestic roadshow in the coming days to introduce the market to Valu, its growth trajectory, and its fundamentals;
  • In April, during our One-on-One Conference in Dubai, we’ll engage with international investors. We believe Valu will appeal to global investors, and we’ll use this opportunity to generate interest.

At this stage, we aim to create strong appetite for U Consumer Finance shares — not just from retail investors but also from institutional investors globally.

E: Can you walk us through the timeline for the transaction?

KA: We will call for a general meeting, likely in May, as this is a standard dividend distribution — except that it involves shares rather than cash. During the meeting, we will determine key dates, including the record and ex-dividend dates. If everything proceeds smoothly, we expect Valu to begin trading sometime in June.

E: How should EFG Holding investors view this transaction in the context of your non-banking financial institutions businesses? What does it mean to your commitment to the NBFI segment?

KA: Our NBFI businesses — including Valu, EFG Corp-Solutions (leasing and factoring), Tanmeyah (microfinance), and Bedaya (mortgage finance) — are core to our strategy. While we are distributing part of Valu, this move unlocks value for EFG Holding shareholders by crystallizing the true market worth of a key asset. The market was not fully valuing Valu within EFG Holding’s stock price, and this helps correct that imbalance. That said, our strategy remains unchanged — we continue to see NBFI as one of our three core pillars of growth. We have full confidence in the management team, which has very ambitious growth plans.

E: How did the regulator react when you first brought up the transaction?

KA: The FRA has been incredibly supportive. From the moment we introduced this concept — back in December or January — they were enthusiastic about the idea. The FRA saw this as a new and innovative way to bring companies to market. Given the current global market conditions, this approach offers a viable alternative to an IPO, one that we believe will attract investors and act as a catalyst for the broader Egyptian stock exchange.

BACKGROUND- We first got word of Valu’s plan to list on the EGX in March of last year, when Hassouna announced that the company would offer up to 25% of its shares on the EGX within a year.

Tags: