ADQ and ADNEC Group have signed definitive agreements for the strategic acquisition of a 40.5 per cent stake in Egypt-based Talaat Moustafa Group (TMG) Holding’s hospitality arm, ICON Group, through a capital increase.

ADQ and ADNEC will invest through a special purpose vehicle, with 49 per cent equity ownership by ADQ and 51 per cent equity ownership by ADNEC.

ICON is a leading player in Egypt’s luxury and upscale hospitality market, with a track record of building and owning some of the most celebrated luxury hotels in Egypt. The group owns four operational hotels – Four Seasons Cairo at Nile Plaza, Kempinski Nile Hotel Cairo, Four Seasons Sharm El Sheikh and Four Seasons Alexandria at San Stefano – and has three hotels and luxury residential real estate assets currently under development, such as the Four Seasons in Madinaty and Luxor and Radisson Collection in Marsa Alam, and one hotel under design, the Four Seasons at The Pyramids.

The transaction represents a major foreign direct investment (FDI) in Egypt and marks a vote of investor confidence in the Egyptian tourism and hospitality sector.

The investment by ADQ and ADNEC in TMG’s hospitality arm will be used partially to de-leverage the existing debt of ICON, with the remaining used for the acquisition of a stake through ICON in the portfolio of seven luxury heritage hotels owned by the Egyptian Government, for which definitive agreements have been signed.

The seven hospitality assets include Marriott Cairo Omar Khayyam Zamalek, Marriott MENA House Cairo, Sofitel Winter Palace Luxor, Sofitel Legend Old Cataract Aswan, Steigenberger Cecil Hotel Alexandria, Steigenberger Hotel El Tahrir Cairo and Mövenpick Resort Aswan.

Post-transaction, ICON will have a combined portfolio of 15 luxury and upscale hospitality assets with a total of around 5,000 keys in prime locations including Cairo, Luxor, Aswan, Sharm El Sheikh and Alexandria. The acquired hotels in Egypt are managed by best-in-class operators and will continue to benefit from the synergies, resources and in-country expertise of TMG Holding.

With tourism high on the agenda of the Egyptian Government, the sector is anticipated to grow to more than 30 million tourists annually by 2028. Egypt currently has a limited supply of heritage hotels across the luxury and upscale segments to cater to the evolving preferences of a new demographic of travellers.

The transaction reinforces ADQ’s interest in investing in assets that can provide continued upside growth and sustainable returns. ADQ is a long-term investor in the Egyptian economy; in the past years, ADQ has made investments in market leaders across different sectors, including the acquisition of Amoun Pharmaceutical Company S.A.E., one of Egypt’s leading pharmaceutical manufacturers, distributors, and exporters.

ADNEC Group has evolved into a full-service tourism solutions provider by creating Tourism 365, a leisure tourism arm, which has existing operations in Egypt and hence offers significant synergistic potential with the investment in ICON.

Humaid Matar Al Dhaheri, Managing Director and Group Chief Executive Officer of ADNEC Group, said: “The investment in ICON is an important strategic step for ADNEC Group, as we deliver on our global expansion strategy and will provide ADNEC Group and its portfolio companies with access to Egypt’s rapidly growing tourism market and reaffirms our commitment to enhance our hospitality and tourism platform. We will work closely with TMG Holding to enhance and grow ICON and create additional value for our shareholders.”

Hisham Talaat Moustafa, CEO and Managing Director of TMG Holding, said: “We are delighted to have ADQ and ADNEC join us as strategic partners and shareholders in this landmark transaction and provide for an exciting outlook going forward. Through this partnership we will pursue substantial growth opportunities in Egypt’s tourism sector and beyond and will unlock further value for our shareholders.”

EFG Hermes is acting as the sole financial advisor to TMG Holding on the transaction.

The transaction is subject to customary closing conditions.