Breaking News: Dubai Holding sells its stake in EFG-Hermes to Western Investors

Yesterday a television station reported that Dubai Group, a unit of Dubai Holding, has sold its stake in EFG-Hermes, the Egyptian Investment Bank, for $120 Million.

Rumors are rife about who the buyer may be. According to news reports on the television channel Al Arrabiya the buyers were Western investment funds who acquired the 19.1 million shares at a price of 25 Egyptian pounds per share ($4.6), a discount of 11% of Tuesday’s close.

EFG-Hermes has generally managed to weather the storm. It has built a reputation as one of the more stable and innovative banks in the region, establishing an exceptionally experienced team of bankers. It is also the largest publicly traded bank in the Arab World.

Analysts will certainly interpret this sale as an attempt by the Emirate to off-load some of its assets in a bid to manage its debt woos.

Fanning the flames will be the history of the acquisition. In December 2007 Dubai Group acquired the stake in EFG-Hermes from Abraaj Capital, the leading Private Equity Fund, for a total of $1.1 Billion for 97 Million Shares. This represents a price per share of $ approximately $11.

Initial reports placed Abraaj Capital as the buyer. Those were later rubbished by the claims that it was, in fact, a group of western investors.

This comes a day after Istithmar, part of the Dubai World group of companies, sold its $285 Million in the W. Hotel in New York at a foreclosure auction for the fire-sale price of $2 Million!

It also comes amidst rumors that Dubai Electricity and Water Authority (DEWA) is close to defaulting on $2 Billion dollars debt payoff. Several weeks ago, and just as the controversy in Dubai began to unravel, DEWA was considering issuing bonds  worth $500 Million.

It has been a tough few weeks for the city and, as time passes by, it seems that everyone is anxiously awaiting the December 14^th deadline for the maturity of the Dubai World debt.