Valu will start trading on the EGX during the week of 22 June following an in-kind dividend distribution by EFG Holding, the fintech giant said in its intention to float (pdf).

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How big of a piece is each shareholder getting? EFG Holding shareholders will receive 1 Valu share for every 3.327 EFG Holding shares they hold as of 12 June, based on Valu’s book value of around EGP 0.8 per share, according to a separate disclosure (pdf) by EFG Holding. There’s no lockup period, which means Valu shareholders can opt to hang onto their shares or offer them for sale anytime after trading starts. Valu still needs to wrap-up regulatory approvals before the start of trading.

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

REMEMBER- This isn’t an IPO. EFG Holding will take U Consumer Finance — which owns and operates the Valu brand — public by giving its shareholders stock in U equivalent to about 20.5% of the company. The financial services giant is giving its shareholders stock in U as a dividend. The “move unlocks value for EFG Holding shareholders by crystallizing the true market worth of a key asset,” EFG Holding Group CEO Karim Awad told us when the transaction was first announced.

EFGH shareholders are in line for a windfall worth north of USD 64 mn, by our math. 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 released back in March. EFG Holding is distributing U shares representing about 20.5% of the company, making the transaction worth c. EGP 3.2 bn (USD 64 mn).

What to watch for: 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. Amazon’s conversion is contingent on a third-party investment in Valu through a sale, IPO, or other liquidity event.

What they said: “This listing marks a significant milestone in Valu’s journey and is a testament to the disruptive and positive impact we have made in the market as one of the leading fintech players in the MENA region and Egypt’s leading fintech platform. With the full backing of our parent EFG Holding, we’re unlocking new value for our customers and shareholders, and accelerating our mission to democratize access to finance in the region,” CEO Walid Hassouna said.

Going public with Valu is the right move for EFG Holding. EFGH created the modern non-bank financial services industry in Egypt, but its shares got effectively zero credit. 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.

Our take: The EGX really needs new paper in the market, and Valu is a household name in Egypt. Foreign institutional investors will be watching this one closely. What we would particularly like to see would be for Banque du Caire to join Valu in going public. Taking BdC public in a successful, well-run IPO — with the right anchor shareholders on board — would send an unequivocal signal that it’s time to look at Egyptian equities once again now that we have a functioning FX market and that the Sisi administration is holding the course on much-needed economic reforms.

BACKGROUND- Valu got the green light last week to temporarily list 2 bn shares on the EGX, with a nominal value of EGP 0.10 per share — bringing its issued capital to EGP 200 mn.

ADVISORS- EFG Hermes Investment Banking is financial advisor on the transaction. Zulficar & Partners and Gibson, Dunn & Crutcher are serving as counsel.

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