AM — EFG Hermes set to tap Goldman Sachs to advise on First Abu Dhabi Bank’s acquisition bid

Good morning, wonderful people, and welcome to another busy workweek. It’s the kind of morning that sends you plenty of mixed signals.

Lots is going well here at home: A great CBE report on fintech is out, FAB’s bid for our friends at EFG Hermes is ticking along, a major UAE investor is looking at Egypt, Europe wants lots of our natural gas, and we just locked in wheat away from the fields on which Russia and Ukraine are locking horns.

But the mood outside our borders is … less welcoming: Those war drums are beating louder and louder in Ukraine — and JPMorgan thinks the US Federal Reserve could go for nine quarter-point rate hikes this year.

SMART POLICY- The Central Bank of Egypt is out this morning with its inaugural Fintech Landscape Report (pdf), underscoring how quickly the nation is making progress on its ambition of becoming “a globally recognized fintech hub in the Arab world and Africa.” Egyptian fintech players raised over 4x more capital in 2021 than they did the year before, the report says, with some 32 startups landing USD 159 mn against the USD 37.1 mn that 25 outfits raised the year before. We’ll have a deep dive into the report next Sunday in What’s Next, but fintech founders (and those dreaming of their own startups) will want to have a close look at pp. 14-15, which provides a great graphical overview of the sector and a map of just about all major players.

Critically, the CBE also includes a roadmap to where it sees room for the industry to grow by providing a clear summary of its “five pillars of fintech and innovation strategy” starting on page 21.

WHAT’S HAPPENING TODAY-

PSA- Expect a foggy commute today and tomorrow: The national weather service is forecasting morning fog on the roads leading in and out of Cairo for the first part of the week. Yesterday’s stormy weather — which saw dense clouds, lightning and rain hit Cairo and Suez (watch, runtime: 0:18) and snow blanket parts of Sinai (watch, runtime: 0:09) — is now in our rearview mirror. Our favourite weather app is predicting sunny skies from and a high of 19°C today.

Look for the weather to warm up a bit through Wednesday with a daytime high of 23°C before the mercury slides below 20°C for the weekend.

The House of Representatives is back in session today. On the agenda:

• The so-called “old rent law,” which would, if passed, allow landlords to evict government agencies, public and private companies, embassies, and other entities leasing properties under the old rent system within five years of its being signed into law. Tenants would pay five times their current rent — with a 15% annual rent hike — in the meantime. The bill doesn’t impact individuals renting residential properties under the old rent system. The House Housing Committee signed off on the bill last month.
• Amendments to the Capital Markets Act. Though the House schedule is scant on detail, this could refer to a Financial Regulatory Authority proposal to allow utilities and other companies to raise capital by securitizing future cashflows, which was greenlit by cabinet in November.

Plenary sessions will run until Tuesday, when the House is set to discuss amendments to the Income Tax Act that would see property owners pay a lump sum tax when they register real estate assets that were sold before 2013. The House of Representatives’ Planning and Budget Committee greenlit the amendments a few weeks ago.

US climate envoy John Kerry is in town today for a two-day visit, where he will meet with Foreign Minister Sameh Shoukry for the inaugural meeting of a US-Egypt climate working group ahead of this November’s COP27 summit in Sharm El Sheikh, according to a US State Department statement. Kerry will also deliver an address at the American University in Cairo on the future of international climate action.

SIGN OF THE TIMES- Two Gulf countries have relaxed travel restrictions:

• Kuwait: From today, fully vaccinated travelers will no longer be required to get a PCR test before traveling or on arrival to Kuwait, and will no longer need to quarantine after arrival, Kuwait’s civil travel authority announced on Tuesday. A post-flight PCR test and seven-day home quarantine is still required for people who are partially vaccinated.
• Bahrain: As of today, all travelers to the Gulf kingdom are no longer required to get a PCR test on arrival or undergo quarantine, Bahrain Airport said Thursday.

The annual 11-member Gas Exporting Countries Forum kicks off today and runs until Tuesday in Doha. The group, which includes Egypt, Russia, Qatar, Iran, Libya, Algeria and Nigeria and accounts for more than 70% of global gas reserves, is expected to discuss ways to ramp up production in the medium term, France 24 reports. Diplomats say expectations aren’t high, given there’s “next to no spare gas” available.

Russian President Vladimir Putin is not expected to show up in light of the situation in Ukraine, while Qatar has been under pressure to secure additional gas supplies to Europe in case Russia cuts the continent off.

Meanwhile, our people have been talking with Europe’s people about upping gas supply to the continent. More on that in today’s newswell, below.

Ethiopia powers up GERD: Ethiopia will start generating electricity from the Grand Ethiopian Renaissance Dam (GERD) for the first time today, unnamed government officials told France24. Negotiations over how to allocate the Nile’s water between Egypt, Sudan and Ethiopia have been on ice since last summer, when Ethiopia completed the second filling of the dam and the international community declined to intervene in the dispute. Egypt has been making an effort to deepen African alliances in light of the dispute ever since.

THE BIG STORY ABROAD- Tensions in Ukraine could be about to snap. Two Ukrainian soldiers were killed yesterday amid escalating violence along the so-called “contact line” in Eastern Ukraine. Violations of a long-held ceasefire pact with Russia-backed separatists have ramped up in recent days, with reports of increased shelling. The sense of apprehension was heightened as Russia began strategic nuclear exercises. President Joe Biden has scheduled a National Security Council meeting for today, as US officials brief that the 150k+ troops mobilized at Russia’s border are “poised to strike.” Meanwhile, Germany and France joined the US and UK in calling for all their citizens to evacuate Ukraine immediately.

Ukraine urged the West to act on its threat of sanctions against Moscow before it’s too late: “Some countries are committing crimes while others are indifferent, and that indifference has turned them into accomplices,” said Ukrainian President Volodymyr Zelenskiy. The New York Times, Financial Times, Wall Street Journal, Reuters, Bloomberg and the Washington Post have more.

CIRCLE YOUR CALENDAR-

The Nebu Expo for Gold and Jewelry 2022 continues today at the Royal Maxim Palace Kempinski Hotel in New Cairo. The event wraps tomorrow

A call for tech startups: The Information Technology Industry Development Agency (ITIDA) and US-based VC firm Plug and Play have launched an incubator and accelerator program for digital transformation-focused startups in partnership with our friends at USAID. The newly launched “Smart Cities” innovation hub will select 20-30 Egypt-based companies for its inaugural three-month program, which starts in March. Startups can apply here before applications close on 28 February.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

*** It’s What’s Next day: We have our weekly deep-dive into what makes and shapes pre-listed companies and startups in Egypt, the UAE and KSA, touching on investment trends, future sector insights and growth journeys.

In today’s issue: Mobile equities trading platform Thndr made headlines earlier this month for raising USD 20 mn in its Series A investment round. We discussed the company’s upcoming plans with Thndr co-founder and COO Seif Amr, who talked about where the company currently stands, how it grew its user base despite the cultural aversion to investing and how users behave on the app.

EFG Hermes plans to pick Goldman Sachs to advise shareholders on First Abu Dhabi Bank’s (FAB) acquisition bid, Bloomberg reported over the weekend, quoting sources familiar with the matter. Goldman ranked first for transaction advisory services in the Middle East last year, according to Bloomberg data.

EFG Hermes said it was looking to appoint an international financial advisor last week, along with an Egyptian law firm, to advise on FAB’s acquisition offer. Meanwhile, FAB has tapped Rothschild & Co as its financial advisor, while Matouk Bassiouny & Hennawy are the lender’s domestic legal advisors.

Let’s recap on FAB’s offer: In what would be the country’s biggest acquisition in years, the Emirati lender announced earlier this month that it had made a non-binding offer to purchase at least 51% of EFG in a transaction that would value the firm at EGP 18.5 bn. The bank has offered to purchase the shares for EGP 19.00 apiece, a 21% premium on EFG’s closing share price the day before the announcement.

EFG’s shares have surged almost 15% since the offer was made, closing at EGP 18.10 on Thursday. FAB could raise its offer price due to “the prominence of EFG Hermes, its financial position, and its strategic role in the financial markets in Egypt and the region,” Al Shorouk reported last week, citing unnamed sources it claimed have knowledge of the matter.

EFG’s top shareholders include French bank Natixis (12.2%) and Emirati investment firm RA MENA Holdings (11.7%). The firm’s ESOP program holds a 5.2% stake. Almost 53% of the firm is in the hands of very diverse group of investors from major institutions to domestic retail investors, the majority of whom do not meet the 5% threshold for publicly declaring their ownership.

IN OTHER M&A NEWS-

Old Mutual unit has competition for controlling stake in Lekela Power: South African mining firm Exxaro and Chinese state fund CNIC are among the final bidders in the running for Actis’ 60%’ stake in Lekela Power, Reuters reports, citing sources it says are familiar with the matter. African Infrastructure Investment Managers — a unit of Pan-African financial services outfit Old Mutual that was last week reported to be vying for the stake —- has also advanced to the final round and is currently seen as the frontrunner, the sources told Reuters.

Could a 60% acquisition become a 100% acquisition? Lekela’s other investor, Mainstream Renewable Power, is also looking to exit, Reuters reports. It had previously been reported that Mainstream was interested in buying Actis out of the renewables firm, which the two firms founded in 2015.

Lekela has a presence in Egypt, Ghana, South Africa, and Senegal and has been valued at more than USD 2 bn. The renewables company inaugurated its USD 350 mn, 250 MW wind farm in West Bakr last November, and said in 2020 that it would funnel most of its investments to Egypt in “the coming period.”

ALSO- Pharma manufacturer Adwia is looking at an acquisition, company head Mohamed Khattab was quoted as saying by Al Borsa, without disclosing the identity of the company. Negotiations should be finalized in March, he said.

One of the UAE’s largest companies is looking at Egypt: Alpha Dhabi Holding is eyeing the “promising” Egyptian and Saudi markets, CEO Hamad Al Ameri told Bloomberg. Egypt is a large market with capacity for more acquisitions, while Saudi is distinguished by its strong growth, he said.

About Alpha Dhabi: The firm is a subsidiary of one of the UAE’s most valuable companies, International Holding Company and works in sectors including construction, hospitality and healthcare. It is also one of the largest shareholders in Aldar — the new co-owners of Egyptian real estate giant SODIC alongside Abu Dhabi sovereign wealth fund ADQ. Alpha Dhabi went public on the ADX over the summer.

More expansions ahead: “We’re tapping and looking at other markets as well … One of the most important things that we’re benefiting from as a group is each company in the existing ecosystem speaks to the other to see [where it could grow],” Al Ameri added.

Emirati companies have been driving much of Egypt’s inbound M&A: Most recently, First Abu Dhabi Bank (FAB) offered to buy a majority stake in leading financial services corporation EFG Hermes. The transaction is now pending due diligence.

Egypt to get mRNA vaccine technology from WHO: Egypt has been chosen along with five other African countries to receive the technology to produce mRNA covid-19 vaccines, the World Health Organization said Friday. In an announcement at an EU-Africa summit, the global health body said that Egypt, Kenya, Nigeria, Senegal, South Africa and Tunisia will be the first African countries to join the WHO’s mRNA vaccine hub initiative, which aims to “support manufacturers in low- and middle-income countries to produce their own vaccines,” the WHO said.

But don’t expect Egypt-made mRNA jabs to roll off the Vacsera production lines anytime soon: Health officials are still to approve vaccines produced through the initiative, a process that the WHO says could take until at least 2024.

The jab is set to look a lot like Moderna’s: A consortium of Afrigen Biologics, the South African Medical Research Council, and Biovac will use publicly available information on an unnamed existing vaccine to replicate it at the WHO’s mRNA vaccine technology transfer hub in South Africa, before sharing the know-how with the local hubs across Africa. The vaccine to be replicated “was chosen because the originator company has publicly stated that it would not enforce patent rights during the pandemic,” according to the WHO. Moderna said just that back in 2020. BioNTech followed suit last week, telling Reuters TV that it would not enforce its IP rights should African nations seek to copy the covid jab it produces with Pfizer.

But the political sands may be shifting: Moderna has filed for patents in South Africa, Reuters reported last week, and the EU is pushing drugmakers to share their covid vaccine-making tech with African countries, Bloomberg notes. South Africa is pushing hard, meanwhile, for an IP waiver for all covid vaccines that is unpopular with the global industry.

IN THE MEANTIME- Could AstraZeneca hand us its vaccine tech? Acting Health Minister Khaled Abdel Ghaffar held talks with AstraZeneca's Middle East and Africa head to discuss obtaining the company’s (non-mRNA) vaccine technology, according to a ministry statement.

Egypt to receive 60 mn more Sinopharm doses from China: China plans to send Egypt 60 mn doses of its Sinopharm jab “in the coming period,” according to a Health Ministry statement. Acting Health Minister Khaled Abdel Ghaffar and Chinese Ambassador to Egypt Liao Liqiang discussed the jabs in a sit-down yesterday. We inked an agreement for 20 mn doses of Sinopharm last year with China, which has also been providing us with raw materials to help us manufacture its Sinovac jab.

The Health Ministry reported 2,025 new covid-19 infections yesterday, down from 2,053 the day before. Egypt has now disclosed a total of 467,448 confirmed cases of covid-19. The ministry also reported 62 new deaths, bringing the country’s total death toll to 23,694.

The vaccine tally: 29,465,603 people are now fully vaccinated against the virus, while some 9.5 mn people have received only their first shots and 905,854 people have received booster shots.

Ghazl El Mahalla FC will debut on the EGX at the beginning of April, Bloomberg Asharq quotes Mohamed Maher, head of bookrunner Prime Holding, as saying. The IPO prospectus will be released “within days” and the subscription period will run from the end of February until mid-March, Maher said.

Refresher: Ghazl El Mahalla is offering a 67.5% stake in its IPO, Maher said. The sale is expected to raise EGP 135 mn, after attracting EGP 37 mn from institutional investors during the private placement. The transaction will mark the first time a football club is taken public in the Arab world and could pave the way for more IPOs of this sort. Football giant Al Ahly has also expressed interest in offering as much as 49% of the club.

GV Group is looking to restructure the company and its subsidiaries ahead of a planned IPO, Al Mal quotes Chairman Sherif Hamouda as saying. The company’s activities include industrial and real estate development, green investments, and specialized contracting. GV has met with unnamed financial institutions to look at the timeline and structure of the planned IPO, Hamouda reportedly said. No details on the expected size of the stake sale or how much the company expects to raise were provided.

Egypt has held talks with the EU over shipping more natural gas to Europe amid growing concerns that conflict in Ukraine could intensify the continent’s energy shortage. EU Energy Commissioner Kadri Simson met Oil Minister Tarek El Molla on Thursday to discuss energy ties, “including in the short and medium term on LNG,” she wrote on Twitter, describing Egypt as a “key partner” for the EU. The Oil Ministry said the meeting included discussions on Egypt’s role in supplying gas to Europe and recent developments in the global energy markets in a statement following the meeting.

Concerns that Russian gas shipments to Europe could be disrupted in the event of conflict in Ukraine have forced the EU to go in search of alternative supplies: The US has ramped up gas exports to Europe and Japan will ship surplus supplies to the continent as tensions between Russia and Ukraine threaten to compound Europe’s energy shortage, which has caused gas prices to surge to record highs. The US has also reportedly held talks with Egypt and Qatar about raising exports if conflict breaks out. The drive comes as US President Joe Biden threatened to block the Russia-to-Germany Nordstream 2 natural gas pipeline if Moscow doesn’t back off Ukraine.

But Egypt appears to be running at max capacity: El Molla said at the end of last year that Egypt’s LNG export terminals were running at full capacity and are exporting the equivalent of 1.6 bn cubic feet per day.

As are European gas terminals: Europe’s LNG terminals have limited capacity to receive more supplies as the US increases shipments. “A few cargoes could be squeezed into some other countries, but not significant supply,” one energy analyst told Reuters.

Egyptian exports to Europe are on course to rise this quarter: Egypt has exported more than 1.3 bn cubic meters (bcm) of gas so far in 1Q2022, more than 1 bcm of which went to Turkey, France, Italy, and the Netherlands, according to S&P Global Platts. In 4Q2021, more than 1.2 bcm was shipped to Europe and Turkey.

The General Authority for Supply Commodities (GASC) just bought 180k tons of Romanian wheat for April shipment in a tender that may help ease policymakers’ concerns about spiking food prices. Seventeen global suppliers took part in last week’s tender — the most in at least five years — indicating that supply issues that have contributed to the price surge may be abating, Bloomberg reported Thursday.

Wheat supply worries? What supply worries? Wheat futures have been rising lately due to concerns about tightening supplies among the world's top exporters. And it’s not just a wheat problem: Global food prices are close to record highs as supply chain disruptions, rising energy prices, poor weather and labor shortages cause markets to tighten.

The Russia-Ukraine factor: Last week, Supply Minister Ali El Moselhy said that escalating tensions between Russia and Ukraine — two of the world’s biggest wheat exporters — was causing “uncertainty” in the global wheat market. Around 50% of our wheat imports were shipped from Russia last year, while 30% came from Ukraine.

Egypt seems to have avoided Ukrainian wheat in the tender: GASC purchased three cargos of Romanian wheat for USD 318 FOB despite Ukrainian suppliers offering a better price. The price of Ukrainian wheat declined 4% during the first two weeks of February, while Russian wheat fell USD 11 in January due to the increasing regional tensions and Moscow’s export controls, according to S&P Global Platts data.

The Supply Ministry is projecting calm, pointing last week to Egypt’s work to diversify suppliers and the local harvest that begins in April. But while we may not be facing an immediate wheat shortage, steps are being taken to mitigate the impact of rising global prices. The ministry is considering several scenarios for tapering bread subsidies for the first time in decades, with a final decision on how they will be reworked by the end of March. The government is also considering hedging wheat. Egypt currently has a 4.5-month reserve of wheat on hand, Prime Minister Moustafa Madbouly said last week.

Banque du Caire is getting USD 30 mn in “tier-two” capital investment under a financing agreement with the Green for Growth Fund (GGF), which is backed by German development bank KfW, among others, according to a press release (pdf). The facility is the GGF’s first tier-two investment in Egypt, after it in January received a license from the Central Bank of Egypt (CBE) to act as a tier-two lender, allowing it to finance Egyptian banks for on-lending to energy efficiency, resource efficiency and renewable energy projects. Banque du Caire in 2020 received the same amount of tier-two capital from KfW’s Sanad fund for on-lending to SMEs and farmers.

OTHER DEBT NEWS-

AAIB lends EGP 1.8 bn for Dekheila Port terminal: Construction firm EDECS is borrowing EGP 1.8 bn from the Arab African International Bank (AAIB) to finance the multi-purpose terminal it’s building at the Dekheila Port, Al Mal reports. The terminal is expected to accommodate 2 mn containers annually once complete.

More money for Porto Minya, Porto Said: Amer Group subsidiary Amer Tourism Development signed a EGP 350 mn medium-term loan agreement with Banque Misr to finance part of its Porto El Minya residential project in Upper Egypt, it said in a disclosure (pdf) to the EGX on Thursday. It also signed a EGP 300 mn credit facility for its Porto Said resort development.

Orange Egypt’s revenues rose almost 11% y-o-y to EUR 960 mn in 2021 on the back of growth in the company’s broadband subscribers, according to the company’s 4Q financials (pdf). The company had some 430k home internet users at the end of 4Q2021, up from 398k the previous year. The network operator had 27 mn mobile customers by the end of the quarter, down slightly from 4Q2020.

You only have to wait it out for five days if you have covid: The recommended isolation period for those infected with covid-19 is five days, provided they’re asymptomatic at the end of the period, Health Ministry Spokesperson Hossam Abdel Ghaffar confirmed to El Hekaya (watch, runtime: 1:51), following reports that the guidance had changed since January. The World Health Organization’s move to give Egypt and several other African countries the technology to produce mRNA covid-19 vaccines also got coverage from El Hekaya (watch, runtime: 4:55). We have more on that story in this morning’s Covid Watch section, above.

The anticipated bread subsidy overhaul also returned to the airwaves last night. Internal Trade Development Authority head Ibrahim Ashmawy phoned into Sada El Balad (watch, runtime: 7:51) to discuss three potential scenarios the Supply Ministry is exploring for tapering bread subsidies: Targeted cuts that ringfence the most vulnerable; raising the price of subsidized bread; and shrinking the size of subsidized bread. Finance Minister Mohamed Maait also dropped into Sada El Balad (watch, runtime: 53:31) to discuss the subsidies with Hamdy Rizk, as well as rising inflation and the new minimum wage on state-owned enterprises.

GERD also featured: The start of electricity production at the Grand Ethiopian Renaissance Dam’s (GERD) got coverage from Ala Mas’ouleety, who phoned former irrigation and water resources minister Mohamed Nasr Allam (watch, runtime: 11:47), and Cairo University water resources professor Abbas Sharaky (watch, runtime: 10:34) to discuss the milestone.

Egypt’s nuclear ambitions get a helping hand from IAEA: The International Atomic Energy Agency (IAEA) is working with Egypt and Saudi Arabia to help them develop nuclear power, IAEA head Rafael Grossi said last week at a conference in Saudi, according to Reuters, without disclosing further details.

An Egyptian nuclear official we spoke to was similarly tight-lipped, telling us only that the agency is providing assistance with “capacity-building and technical support.” This follows recent talks between President Abdel Fattah El Sisi and the IAEA chief, who traveled to Cairo in December to discuss Egypt’s nuclear energy plans.