CAIRO: Worries that Pioneers Holding’s purchase of Egyptian securities firm Beltone Financial could have a major ripple effect in the region have begun to grow since the deal was announced November 8. Egyptian investment bankers have already begun to question what the convergence will mean to their business.

Mahmoud Abaza, an Egyptian investment banker at a local firm, says that the deal is going to put more pressure on the smaller companies to outperform the larger ones, especially now that there is a new leader.

“In the past two days, our bosses have already begun to talk about the need to push on and secure our customers because they know what happens when companies come together here. It is good for them and a smart move, but it will hurt the smaller companies who struggle to keep customers happy in the face of this kind of competition,” Abaza said in a phone interview.

Pioneers Holding agreed to a share swap with Beltone in what is seen as an asset-management gain in the aim of creating the Middle East’s largest investment bank.

Pioneers said on Sunday that it would issue 100 million shares to Beltone’s owners, creating some 17 percent of the companies’ combined capital. Beltone did not say what the new premiums for the new shares would be, but this is expected soon.

Pioneers shares skyrocketed nearly 8 percent as optimism over the deal grew. At the current price, the 100 million Pioneers shares are valued at around $131.8 million. The deal is part of the Arab world’s continued efforts to heal from the global economic crisis that adversely affected the region’s markets, but not nearly as badly as Western markets.

“Pioneers will benefit from Beltone in the strong institutional and foreign clientele that they lack, and Beltone will benefit from the strong retail side at Pioneers’ brokerage,” said Walaa Hazem, vice president for asset management at Cairo-based HC Securities & Investment Co. in a statement to Bloomberg News. “In asset management, Beltone has a good platform, especially in fixed income,” Hazem said.

Pioneers has 30 offices in Egypt, Saudi Arabia, the United Arab Emirates, Syria and Bahrain. Beltone, which is a private company, said it has 26 billion Egyptian pounds ($5 billion) of assets under management. According to an October report, Beltone sealed 34 investment-banking deals valued at some 42.6 billion Egyptian pounds in the past five years.

Abaza is optimistic, however, that if done properly, the new deal will help create more competition, despite fears of monopoly.

“I think that it will be fine and we will all see and learn from this kind of deal and push on with our efforts to keep our business up, especially now that we are getting out of the crisis every day,” he said.

BM

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