Insurance giant AXA acquires leading Egyptian player, Commercial International Life (CIL), for a total equity consideration of EGP763 million, marking one of the largest M&A deals ever undertaken in the Egyptian insurance sector. The man who spearheaded the sell-side process on behalf of the sponsors of CIL was Hesham Gohar, Head of Investment Banking at CI Capital. Here’s his account of the deal:
What was the actual deal relating to this award? Who was involved? What was at stake? What was it worth in monetary/reputational terms?
The deal involved the sale of Commercial International Life (CIL), a leading Egyptian life & savings insurance player, to France’s global insurance leader, AXA. CIL was jointly owned by the UK’s FTSE 100 insurance behemoth Legal & General (which had a 55 per cent stake) and CIB, Egypt’s largest private-sector bank. In addition to the sale of 100% of CIL, a new 10 year exclusive Life & Savings bancassurance agreement was also arranged between CIB and CIL.
The acquisition value of the deal was EGP 763 million (for 100% of the equity of CIL), representing one of the largest ever transactions undertaken in this sector. Legal & General and CIB had established CIL back in 1998. Today, CIL is one of the leading players in the Life & Savings insurance sector in Egypt with approximately 90,000 insurance policies and 350,000 customers. It enjoys a 15 per cent market share and offers a choice of unit-linked and protection products. It achieved a 23 per cent annualised premium growth between 2012 and 2014.
What particular part did you personally play in executing the deal?
I was very closely involved with all aspects of the transaction from the onset. However, it was the concerted effort of all members of the CI Capital team, as well as the deal team members of both sponsors together with our external advisors which led to the successful completion of this landmark transaction. Our team project-managed the entire sale process – from preparing the company for a transaction of this nature, undertaking the pilot fishing exercise to gauge the interest of global strategic investors, articulating the investment case to interested parties, organising the due diligence process and finally managing several rounds of competitive bidding. We also liaised with all stakeholders in negotiating the transaction documentation and helped secure the necessary approvals. It was an extremely well managed process with everyone involved demonstrating astute professionalism throughout the year-long engagement.
What other deals have you been involved with recently?
The CIL/AXA deal capped CI Capital Investment Banking’s most successful year ever. This year, we advised on a total of nine transactions with a value exceeding EGP11billion. Our other notable M&A transactions of 2015 include the EGP1.0bn sale of leading cement producer ASEC Minya Cement and ASEC Ready Mix to Misr Cement Qena, the EGP518m acquisition of market-leading confectionary player Al Rashidi Al Mizan by Saudi Arabia’s Olayan Financing Company, and the sale of a minority stake in Egyswiss Group to regional private equity firm Vis Mundi. We have also been very active as advisors on equity capital market transactions, having advised on the Orascom Construction Limited EGP1.4billion offering on the Egyptian Stock Exchange, the EGP506million follow-on public offering of Orascom Hotels & Development and also the demerger of Amer Group, which created two independent publically listed companies.
What other strategic initiatives does CI Capital have planned for the future?
CI Capital has evolved over the past few years into a leading full service investment bank offering innovative financial solutions to its clients across the globe. We are a client-centric firm with best-in-class execution capabilities and a leading track record across our business lines. While we continue to consolidate our position as the market leader across our core business, we have also embarked on an ambitious expansion plan both organically and through acquisitions, in areas which complement our product and service portfolio. For example, we recently announced the establishment of our private equity business, in partnership with UK-based emerging markets focused asset manager Duet Group. Our joint venture with Duet has launched a USD 300million private equity fund which targets buyout and growth capital opportunities of Egyptian companies in the consumer sector.
Also this year, we announced the acquisition of a substantial stake in Corplease – one of the largest leasing companies in the country. Corplease is the local leasing champion with a leading track record and substantial share of the market, and importantly, with aspirations for regional expansion. As far as our own regional expansion strategy is concerned, we have received our license to set up a sales and trading platform in the United Arab Emirates, with plans to be operational during Q1 2016. We will continue to pursue both organic and inorganic expansion opportunities which are complementary to our service offering and through which we can expand our distribution channels.
How do you see the future (end of this year and 2016) in your line of work in this rapidly moving sector – both on a company and national/international level?
We are facing strong headwinds in the short term as a result of the uncertainty surrounding us from a geopolitical perspective. Our region is one which has witnessed high levels of volatility over the past few years – which has and continues to translate negatively on investor sentiment. Our core Egyptian market is going through a transitional period and a lot of work still needs to be done, particularly with respect to policy reforms. However, I am optimistic about the future and believe we will soon be looking at the front end of a big wave. While our markets continue to look challenging in the short-term, there are always opportunities for investors and we strive to put our clients in the path of good ideas. Egypt’s long-term investment case is sound, and we strongly believe in the fundamentals of this economy which should drive a market recovery, generating above-average returns for investors.