It’s an M&A boomlet, ladies and gentlemen

Sir Suma in town to ink EUR 320 mn in agreements: European Bank for Reconstruction and Development President Sir Suma Chakrabarti will arrive in Cairo today to sign EUR 320 mn in loan agreements with the government. The loans will help finance transportation, irrigation, and water infrastructure development projects.

Enterprise is powered this morning by Ethiopian coffee out of a French press. We see it as part of our campaign to make sure we receive our fair share of Nile waters. Six flat 2T coffee scoops of coarse-ground coffee in a large Bodum French press. Pour water slowly to saturate all the coffee grinds. Let sit one minute. Stir 24 times, slowly, then pour immediately into carafe. Top-up with hot water to taste.

With just over two weeks to go before the Holy Month is due to begin (probably on 7 June), we’re looking at the usual pre-Ramadan crush of conferences this week and next:

• On 25-26 May (Wednesday-Thursday) The Middle East and North Africa Solar Conference and Expo MENASOL 2016 kicks off at the Hyatt Regency in Dubai.
• Also on Wednesday: The FAO and EBRD conference “Securing the future of Baladi bread: how Egyptian public-private partnerships can help deliver tomorrow’s food security,” Sofitel El Gezirah, Cairo. Register here.
• The second Africa and Middle East conference on software engineering (AMECSE) is happening at Intercontinental Citystars in Cairo on 28-29 May.
• N Gage’s Investment Regulation Forum in cooperation with Pepsico hits the ground running on 29 May (Sunday) at the Four Seasons Nile Plaza, Cairo. Register here.
• The two-day Middle East Regional Forum Egypt kicks off on Monday 30 May at The Movenpick Hotel & Casino Cairo-Media City in Cairo.
• On 1-2 June (Wednesday and Thursday) the Cisco Connect Egypt 2016 is taking place at Cairo’s Royal Maxim Palace Kempinski. You can go ahead and tap here to register.
• Right after, the first annual EBRD Research Symposium on the Economics of the Middle East and North Africa takes place on 2-3 June (Thursday-Friday) at the EBRD headquarters in London.

And, finally, don’t expect an agreement on production output cuts when OPEC meets on Thursday, 2 June.

Human remains retrieved from the crash site of EgyptAir flight MS804 “suggest there was an explosion on board that may have brought down the aircraft in the east Mediterranean,” an Egyptian forensics official said. The official, speaking on condition of anonymity, said the remains were all small and carried burn marks, suggesting a blast, but he could not say what caused it, he told the AP. There was no official comment from France’s aviation accident investigation agency. State news agency MENA reported that head of forensics Hesham Abdel Hamid denied the statement, saying investigators have so far discovered no traces of explosives. "Everything published about this matter is completely false, and mere assumptions that did not come from the Forensics Authority,” Abdel Hamid said.

Greece will begin sending Egyptian authorities key data of the crash on Wednesday, including data on the airliner as it flew through Greek airspace moments before disappearing, an unnamed source close to the probe told Reuters on Tuesday. Two sources told the news service that Greece is sticking by its claims that the plane lurched violently in mid-air before disappearing off radar screens. National Air Navigation Services Company Chairman Mohy El Din Azmi denied the accounts on Monday, as we noted in yesterday morning’s edition.

Competing theories on causation still battling it out: In other news on the crash this morning, Egyptian investigators speaking with Reuters said the airliner’s systems reported no problems before takeoff from Paris, while the Financial Times (paywall) notes that speculation about terrorism continues despite no claim of responsibility for the disaster. The salmon-colored paper writes: “The sequence of events suggested the crew had fought a losing battle against an onboard fire for several minutes rather than succumbing to a catastrophic break-up caused by a bomb. But French air crash investigators, who are involved in the inquiry, said the smoke alarms did not prove there was a fire onboard. They said that monitors can be triggered by air condensing rapidly inside the aircraft following a sudden depressurisation of the aircraft, caused by a catastrophic structural failure.”

Whatever the cause, the air disaster will prompt the U.S. to close ranks with Egypt despite Washington’s displeasure with Cairo’s human rights record, the Wall Street Journal suggests, quoting a “Western diplomat” as noting that “An incident like this on the heels of another airline disaster is always going to speed up any cooperation on security even if the cause is not yet clear.” Meanwhile, Amnesty International “is calling on European Union member states to halt arms sales to Egypt over human rights abuses it characterizes as ‘fueling killings and torture,’” the Associated Press reported last night.

We have a mini M&A boomlet this morning, ladies and gentlemen, with news from the retail, media and food services sector again underscoring our thesis that while manufacturers and pure importers look for a razor sharp enough to slash their wrists, those building plays on the Egyptian consumer story are actually rather optimistic.

U.S.-based buyout shop TPG Capital is reportedly in talks to acquire the Spinneys supermarket chain in Egypt from leading emerging markets PE outfit Abraaj Group, two sources told Bloomberg. If completed, the acquisition, which could be worth USD 100 mn, would be TPG’s first transaction in Egypt. TPG “would enter into a franchise agreement with Spinneys as part of the deal, one of the people said. No final decision has been made and talks may still falter, the people said.” Representatives from TPG and Abraaj declined to comment, Bloomberg noted. According to a Middle East Economic Digest research document reproduced on Abraaj Group’s website, Abraaj bought a 46% stake in the storied retailer in 2004 for USD 27.1 mn from Cupola group, which retained 35% ownership. TPG’s investments include Airbnb, Continental Airlines, Box, Burger King, Ducati, SaxoBank, Spotify and Uber, among others. The outfit has about USD 70 bn in assets under management.

Nestlé is in talks to acquire a stake in Caravan Foods, which sells coffee products under the Bonjorno brand name in Egypt, Al Mal reported. Nestlé has made an offer for the company, sources said, but negotiations are still in preliminary stages. The size of the stake Nestlé is bidding for and its valuation of Caravan Foods was not given, with Nestlé refusing to comment. Al Mal says Caravan Foods is soliciting investors to finance its growth plans and has already appointed CI Capital as its sell-side advisor.

Meanwhile, television networks Al-Nahar and CBC will be merge under “one economic entity,” according to Al Borsa. Al Ahram says the networks will create a holding company managing both of them to “face major changes” in the market. The decision was reached following meetings between Al-Nahar CEO Alaa El Kahky and CBC owner Mohamed El Amin that led to their agreement on the merger. The merger will take place in six months’ time, said El Kahky, who encouraged other media companies to join the alliance, Al Shorouk reports. There were no financial details or word on advisors provided, nor was there news on the management, legal structure or branding for the new entity.

Kuwaiti-owned investment firm Al Salam Holdings is mulling a listing on the EGX, according to Prime Holding CEO and vice-chair Mohamed Maher. It seems the company could make its first filing with the Egyptian Financial Supervisory Authority (EFSA) as early as next month, the Daily News Egypt reports. As we noted back in January, Al Salam Holdings plans to have 30% of its shares converted to Egyptian depositary receipts and traded on the EGX by July of this year.

Tarek Nour Advertising goes green with Etisalat: Tarek Nour Advertising has signed a communications consultancy agreement with Etisalat Misr. The agreement sees TNA put its extensive resources to work for the green network in what’s shaping up to be a big year for the mobile network operators as the industry girds itself for the entry of a fourth operator and the possible launch of 4G data services. TNA has been responsible for some of the more memorable campaigns in the telecom sector since the 1990s, first with Mobinil, then with Vodafone in the 2000s. You can catch one of their first Etisalat spots here.

The Central Bank of Egypt kept the exchange rate unchanged in its FX auction yesterday, where it sold USD 118.6 mn at EGP 8.78 for USD 1. Reuters says the parallel market rate weakened to EGP 11.00 per USD 1.00 from EGP 10.95-10.96 per USD 1.00 earlier in the week. Al Masry Al Youm also says the selling price on the parallel market is EGP 11.00 per USD 1.00.

Naturally, the CBE intensified its crackdown on FX bureaus as a result, closing down El Shaimaa Exchange. This brings the total number of exchange officers shuttered to 15, by AMAY’s count. Sources claim more have been shut down recently, as the central bank has widened the scope of the crackdown to other governorates, with some bureaus in Hurghada reportedly also being ordered closed.

Checks and balances: A number of members of the House of Representatives criticized the Ismail government’s publication of its approval of a USD 25 bn loan from Russia to build the Daba’a nuclear power plant. The representatives say the loan terms were not presented to them and have not been discussed in the relevant sub-committees as mandated constitutionally, Al Mal reports. A constitutional law professor downplayed the concerns, saying the terms published in the Official Gazette were merely “routine” and didn’t require parliamentary approval. Other parliamentarians are questioning the need for a nuclear power plant in the first place. The domestic press has essentially concluded that it’s unclear whether the executive branch of government has overstepped or whether it’s the House that’s clueless as to (a) proper procedure and (b) where it’s powers end.

A few more earnings for you this morning: Qalaa Holdings’ subsidiary ASCOM Geology and Mining reported a net loss of EGP 8.9 mn in 1Q2016, reversing a profit of EGP 5.9 m a year earlier, according to a company statement. Al Ezz for Ceramics and Porcelain’s 1Q2016 net profit rose 4% y-o-y to EGP 9.4 mn, according to a regulatory filing.

An African Development Bank delegation is expected in Cairo from 29 June to 5 July for talks regarding the second tranche of the USD 500 mn budget-support loan signed last year, the International Cooperation Ministry said in a statement.

Other stories we’re taking note of this morning at home and abroad:

• Egypt expects to net EGP 43 bn in revenues from sin taxes on tobacco and alcohol next year.
• Poultry prices are up about 10% in the past few days, well on their way to the 20% rise predicted by the start of Ramadan amid a seasonal spike in demand, Al Borsa reports, while red meat has hit EGP 100 per kilogram according to Al Mal.
• Russia’s sale of SSJ-100 airliners to Egypt is in large part dependent on when Russia allows a resumption of direct flights to Egypt, Russian state news agency TASS quotes Russian Minister of Industry and Trade Denis Manturov as having said yesterday.
• Biotech seed giant Monsanto is playing hard to get, spurning a USD 62 bn offer from Bayer, but saying it might be open to talks, the Wall Street Journal reports.

Bank of England Governor Mark Carney was noticeably annoyed as he addressed accusation that he was adopting the same “propaganda” as the Treasury. He made no apology for comments that Brexit could trigger a recession, telling MPs “there was also a risk to mortgage rates even if the central bank cut its official interest rate,” according to the FT (paywall). Carney’s response when asked whether former employer Goldman Sachs Group encouraged him to warn of Brexit risks? “Wow. I refute it categorically and I am stunned to even have it raised.” The GBP was seen gaining in the first time in three days on the news and the results of a recent poll showing the leave campaign is losing ground.

Insider threats to airport security aren’t just Egypt’s problem, writes Owen Matthews for Newsweek in a lengthy account of the Metrojet crash. "Security is only as good as the weakest link—and that weakest link may well be the airport staff member, who whilst passing all appropriate checks and screening is secretively becoming radicalized," says Mike Vivian, a veteran civil aviation pilot.

While the United Nations World Tourism Organization on May 11 picked Luxor to play host to two of its gatherings later this year, the unfortunate crash of EgyptAir MS804 has set tourism officials once again into crisis mode. Egypt “has found itself in time and again blindsided by yet another crisis and dreading another blow to its vital tourism sector,” writes Patrick Scott for the New York Times’ travel section. But all hope isn’t quite lost, according to Sandra Carvao, chief of communications for the United Nations world tourism group. “When you look at it there’s a capacity to actually recover that is relatively strong,” she said, “even when the situation is complicated.”

President Abdel Fattah El Sisi has it in for liberals more than he does Islamists, writes Foreign Affairs’ Muhammad Mansour. The president, apparently mirroring Mubarak before him, appears to be softening his approach to Islamists in the hope they’ll be more open to political agreements. But not so much with liberals. “Instead, [liberals] have aligned themselves with the West, which reinforces the Egyptian military’s paranoia that Western-backed NGOs are trying to destabilize the government,” writes Mansour.

The pillars supporting the recent rally in emerging market shares appear to be crumbling, Morgan Stanley’s EM strategy team says in a report picked up by Business Insider. “Risk conditions have turned and have started to expose weak fundamentals and structural imbalances once again,” they say, slapping an underweight rating on all EM asset classes it covers in the short and not so short term. “To be clear, we are not calling for another debt crisis, but the cost of not dealing with the EM debt problem exacerbates deflationary pressures and will likely hinder growth and efficient allocation of capital on a sustained basis,” it says. Read: MORGAN STANLEY: The pillars supporting emerging markets ‘seem to be crumbling’ and then follow it up with BI’s The market as we know it is ‘crumbling’.

President Abdel Fattah El Sisi met with a French parliamentary delegation headed by Philippo Folliot, the Chairman of the Egyptian-French Friendship Group, Al Mal reported. The meeting discussed strengthening inter-parliamentary relations, bolstering international efforts to combat terrorism, and cementing positive relations between the two countries in light of the EgyptAir flight MS804 air disaster.

An Israeli delegation reportedly arrived secretly in Cairo on behalf of Prime Minister Benjamin Netanyahu to arrange talks with President Abdel Fattah El Sisi in the hopes of organizing a meeting between Netanyahu, Palestinian Authority President Mahmoud Abbas, and El Sisi, the Jerusalem Post reports on Tuesday.

Investment Minister Dalia Khorshid has requested that GE present an investment plan with specific projects and a timeline, following a meeting with President Abdel Fattah El Sisi, Amwal Al Ghad reported. GE had expressed interest in increasing investments in the energy, transportation, health, technology, and software sectors. Khorshid highlighted the importance of the projects in providing job opportunities and training for youth.

Egypt and Saudi Arabia will link their electricity grids starting in early 2019, New and Renewable Energy Authority chief Mohamed El Sobky told Amwal Al Ghad. Both countries are set to benefit from the project due to a difference in peak usage hours, he added. There’s a direction in the energy sector leaning towards connecting with African countries through expanding Egyptian-African partnerships in renewable energy projects, he said. The ministry is preparing feasibility, technical, and economical studies on interconnection projects with the Nile Basin countries, he said, noting that they will be complete within a year.

The Oil Ministry has reached an agreement with the Electricity Ministry to supply 18 mcf/d of gas to three Siemens power plants in December to begin the 4.4 GW production at the Beni Suef power plant. A monthly delivery schedule with the quantities required for each plant has also been agreed upon, said Gaber Desouky, head of the Egyptian Electricity Holding Company. Trial runs in September and October will require 15 mcf/d. All three plants will need 66 mcf/d (22 mcf/d each) to produce a total of 14.4 GW when they become fully operational, Al Borsa reports.

The Arab Petroleum Pipelines Company (SUMED) is preparing to build a new USD 350 mn pier at the Ain Sokhna port after settling on an Orascom-led consortium, head of Business Development at SUMED Adham El Sadek told Amwal Al Ghad. Construction is set to begin next month and should take 10 months to complete. EGAS is currently looking to contract a third FSRU to receive LNG shipments, he stated.

The Internal Trade Development Authority (ITDA) is looking to tender 400 feddans, scattered across a number of governorates, to investors to build commercial chains, said ITDA Chairman Ahlam Rashidi, Amwal Al Ghad reported. The land is most notably divided between Beni Suef, Hurghada, Marsa Matrouh, and Luxor, she added. The tender can be expected around August, she noted.

El Sewedy Cement became the first company to submit a technical and financial offer for one of the 14 new cement licenses, Al Mal reports. Thirteen other cement companies have informed the Industrial Development Authority (IDA) that they will submit offers, said an IDA official. The source added that companies outside the cement industry who want in on the new licenses began forming consortiums a few days ago. The IDA had extended the deadline for submitting offers to 30 May from 10 May to accommodate these new entrants.

A joint Vacsera-Novo Nordisk project to manufacture insulin has entered the first phase of operations, Al Shorouk reported. Egypt’s demand for insulin stands at 22 mn vials per year, said Nabil El Beblawi, chairman of Vacsera subsidiary EGYVAC, noting that the project aims to build an EGP 110 mn insulin production plant that will provide 25 mn vials by 2020 to meet domestic demand, with any excess being exported. Novo Nordisk will provide Danish technology, know-how and raw materials. The cost of domestically produced insulin will be 25% cheaper than current alternatives, he added.

The recently approved increase in the price of treatment for health conditions is not proportionate with the EGP devaluation against the USD, according to an industry official quoted by Daily News Egypt. Instead, it is only a “slight increase” meant to encourage manufacturers to resume production of loss-making products. The EGP depreciated 62% against the USD, but prices only increased by 20%, he said. The increase is meant to provide a profit margin from some products to cover losses incurred on others.

Property developer Madinet Nasr Housing and Development is considering an EGP 1 bn long-term debt facility, according to a bourse statement. The funding would be directed toward speeding up the infrastructure build-out for phase one of the Sarai project. Sarai is being developed on a 5.5 mn sqm land plot located in New Cairo.

The Pakistan Telecommunication Authority has approved the merger of Global Telecom Holding-owned Mobilink and Warid with “certain conditions.” The Pakistani regulator has issued 10 conditions in its approval, including a requirement that Mobilink accept Warid’s liabilities and for the two companies to continue to operate as separate legal entities until the merger is complete. The Pakistan Telecommunication Authority has asked both parties to accept its terms unconditionally.

The frequency band spectrums that will be used to cover 4G will include the 700 MHz band, previously used by the ERTU for TV and radio, and the 900 MHz, 1,800 MHz, and 2,100 MHz bands, all of which were used by the Armed Forces or other sovereign entities, sources tell Amwal Al Ghad.

The Transport Ministry has shelved plans to build a port in Alexandria in a central location between the ports of Alexandria and Dekheila, Al Mal was informed. The project was reportedly a high-priority one under previous governments. However, the projected cost of development of over EGP 10 bn has become prohibitive as plans to develop existing ports are prioritised.

Al Amal Group, the official agent in Egypt for China’s BYD and Russia’s Lada, is planning on manufacturing tuk-tuks at its Tenth of Ramadan City plant in the coming period, Al Mal reports. The company is studying sourcing 80% of the components for tuk-tuks in Egypt, said Al Amal Chairman Hassan Suleiman. The company plans to begin selling the three-wheelers in 1Q2017, said Suleiman, adding that no new investments will be needed as its facilities are already well-equipped to handle production.

A number of employees at Piraeus Egypt bank have submitted a formal complaint to the central bank protesting the new staff structure implemented following the acquisition by Ahli Bank of Kuwait (ABK). They say their rankings were changed within the organization, which effectively led to demotions for a number of middle managers and lower ranking employees. According to Al Masry Al Youm, the employees went to the central bank after ABK rebuffed their complaints.

Gulf Cooperation Council banks operating in Egypt are “rushing” to raise interest rates on savings products offered to customers, Al Ahram says. Emirates NBD announced USD-denominated certificates of deposit paying up to 5.25% along with EGP-denominated ones paying between 11.5% and 15%. National Bank of Kuwait also issued similar USD-denominated products, it added.

Microfinance lender Tanmeyah is in talks with four unnamed Egyptian banks to secure more financing to meet its target of providing EGP 1 bn in microloans this year, said Tanmeyah CEO Amro Abouesh. The EFG Hermes-owned company plans to sign a contract with one of these banks in two weeks’ time, he added. Tanmeyah had provided EGP 870 mn in loans to 110K clients last year, Al Borsa reports. The company also plans to add 20 new branches this year to its network of 114.

Industry and Minister Tarek Kabil presented the ministry’s targets and strategy to the House Industry Committee. For the most part Kabil rehashed what was said in previous statements and the Ismail Cabinet plan, namely seeing the growth rate for industry hit 8% by 2017-18 (this was extended to 2020 in his speech to the House) and upping its contribution to GDP to 21%. He promised to up support for exports and cut growth on imports, a policy which led to a 5.3% growth in exports in 1Q16, and a USD 2.8 bn reduction of imports. Meanwhile, Oil Minister Tarek El Molla said that 50% of Egypt is untapped for exploration at his briefing of the House Energy Committee.

Each loaf of baladi bread will cost the government EGP 0.31 to produce, according to FY2016-17 budget data, Al Borsa writes. A baladi bread loaf is still being sold at a subsidised price of EGP 0.05 — 16.1% of its real cost.

Egyptian job search engine Cantalop closed a seed funding round of USD 100,000 “with an anonymous businessman from the iron and steel industry,” Wamda’s Iman Mostafa wrote. “Cantalop focuses on highly educated job seekers, such as graduates from international universities or holders of advanced degrees, who might face difficulties finding jobs that match their qualifications and skills.” The funds will be used to market the platform, founder Karim El Halawani said.

An Egyptian appeals court on Tuesday overturned five-year prison terms for 47 people protesting the Saudi-Egypt maritime border demarcation on April 25, judicial sources said, according to Reuters. The court, however, upheld fines of EGP 100k each, which defence lawyer Nour Fahmy said he would appeal for a second and final time to get cancelled, he told Reuters.

Inscribe a few words on a copper plaque and then affix it to the object of your desire’s sandal. That’s the recipe for one of the love spells discovered to be written on two newly deciphered papyri from Egypt dating to the third century AD. The spells were written in such a way that “the person who cast [them] would only need to insert the name of the person being targeted — sort of like an ancient ‘Mad Libs.’”