Shuaa Capital has looked at least two brokerage companies in Egypt as potential acquisition candidates as the investment bank seeks to boost revenues amid a slump in its local UAE market, three sources said on Wednesday.
Shuaa, which took companies like port operator DP World to the market, has looked at HC Securities and Beltone Financial as potential targets, said two of the sources, speaking on condition of anonymity.
“They (Shuaa) do have some cash on their balance sheet from previous asset disposals and revenue generating capabilities in the UAE are limited,” said one of the sources. “Not that they are great in Egypt now, but if they can get a deal done at a low price, it could be beneficial in the long-term.
“You would expect some sort of stability to return in Egypt. The question is if it is this year or next or after.”
Shuaa, which has said it was looking for strategic assets, has been relying on its own investment banking team and has not hired external banks for the process, one of the sources said. Talks are at initial stages, one source familiar with the matter said.
The sources did not want to be identified as the matter has not been made public. A Shuaa spokesperson in Dubai declined to comment. Officials at HC Securities and Beltone were not available for comment.
Shuaa, one of the Gulf Arab region's largest investment banks, was hit hard by the global financial downturn as impairments related to troubled assets erased profits. It has been shedding risky assets from its investment portfolio after Dubai's property crash and asset bubble.
Its core brokerage and investment banking business has suffered amid a slump in initial public offerings and muted trade volumes in the United Arab Emirates.
The investment bank is trying to take advantage of low valuations in the brokerage sector in Egypt, the sources said. The north African country saw violent political protests earlier in the year which led to suspension of its stock market and a sharp slump stock market valuations.
Shuaa posted a small second-quarter net profit in July, helped by aggressive cost cuts and strength in asset management business.
It held around $112 million (412 million dirhams) cash and deposits as at June 30, mainly from the sale of non-core assets.
Shuaa shares closed 1.9 percent lower on Wednesday. They have fallen 32 percent year-to-date.