Is Ahli United Bank looking to sell its Egypt unit?

It’s a typically quiet Monday news day, and as we suggested yesterday, the House of Representatives dominated newsflow, discussing amendments to the Anti-Terror Act and gearing up for votes on key pieces of legislation including the Consumer Credit Act and, soon, the long-awaited Banking Act. We have more in this morning’s Speed Round.

Expect a wave of oil and gas announcements over the next three days as the Egypt Petroleum Show gets underway today at the International Exhibition Center. US Ambassador to Egypt Jonathan Cohen will be there, the embassy said in a statement that notes Washington “believes that Egypt is positioned to be an important regional energy hub, for Africa, the Mediterranean, and the Middle East.” Cohen will be accompanied by senior energy officials from the State Department, Department of Energy and US Trade and Development Agency. Twenty US companies are participating, as are 10 French companies, including Schneider Electric, Total, and Technip, according to a French embassy statement (pdf).

Inflation data for January is out today. The rate of inflation accelerated to 7.1% in December after hitting multi-year lows of 2.4% in October, thanks in large part to the easing of the base effect.

Global venture capital group Kauffman Fellows is in Cairo for a three-day visit from Thursday, 13 February.

The Central Bank of Egypt meets a week from Thursday to consider interest rates.

Asian markets opened lower and US stock futures also dipped this morning, starting off a week “that may prove crucial in determining the trajectory of coronavirus cases, and in turn the prospects for a v-shaped economic recovery,” Bloomberg says. Investors are keeping an eye on how quickly the virus’ reach extends beyond China, and mounting concerns have already nudged up gold prices, the business information service notes.

Cryptocrime is very real — and rather lucrative: Cryptocurrency-related scams raked in nearly USD 4 bn last year amid a wave of new interest, notably from novice investors, in the fast rising currency. The Wall Street Journal details the swift rise and fall of the most prolific fraudsters at PlusToken, the six-man operation out of Vanuatu, that single-handedly drained investors of nearly USD 2 bn last year.

How stock exchanges are shifting towards diversification: Exchange operators — including NYSE’s parent company Intercontinental Exchange, the London Stock Exchange Group and Nasdaq — have become “diversified multinationals,” offering a host of global financial services, writes Alexander Osipovich in the Wall Street Journal. This is because it’s no longer sufficiently profitable to be a mere exchange, he argues, and getting a foothold in data sales and technology is therefore an appealing alternative. NYSE’s bid to acquire eBay — which it abandoned last week following investor backlash — appears to have been part of this direction towards diversification, as the exchange operator was likely looking to mine the online marketplace for data, Osipovich says.

In international miscellany:

• UN calls for international action on African locusts: Developed countries should provide “speedy and generous” financial assistance to East African countries currently combating a severe outbreak of locusts. (Bloomberg)
• UN Libya talks to continue this month: Libya’s rival factions will meet again in Geneva next week for ceasefire talks after the first round of negotiations last week failed to produce a permanent truce. (Reuters)

Egypt’s #1 tennis player ends our 24-year ATP dry spell: Egyptian tennis player Mohamed Safwat brought home yesterday Egypt’s first ATP Challenger Tour title in 24 years, and his personal maiden title, according to the tournament's website. Safwat claimed the title after defeating Alex Bolt in his homeland, Australia. Tamer El Sawy last earned the title for Egypt in 1996 in New York City.

The Oscars kicked off a few hours ago, but only a few major category winners had been announced as of dispatch time. Brad Pitt took home the Academy Award for best supporting actor for his role in Once Upon A Time … In Hollywood, while Marriage Story’s Laura Dern won best supporting actress. The millennials among you will appreciate that Toy Story 4 won best animated feature. You can catch the full list of winners here courtesy of the New York Times.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: We explore the state of career services at Egypt’s universities and how they are in further need of strategic investment to be able to meet the needs of the job market.

The nation’s chattering class are still preoccupied with the African Union’s (AU) heads of states gathering, which President Abdel Fattah El Sisi took part in yesterday.

El Sisi hands over AU chairmanship to Ramaphosa: Al Hayah Al Youm’s Lobna Assal took note of El Sisi has officially handing over the AU’s rotating chairmanship to South African President Cyril Ramaphosa. El Sisi spoke to the AU’s assembly of heads of states, recapping Egypt's one-year presidency and the country’s efforts to promote security and peace in the continent (watch, runtime: 1:25). Al Kahera Al Aan’s Lamis El Hadidi also took note of the speech (watch, runtime: 4:20).

New African counterterror task force in the making? Assal phoned former former Organization of African Unity Assistant Secretary General Ahmed Haggag for a chat about the president’s proposal to host a summit in Cairo to look into creating a pan-African counterterrorism task force (watch, runtime: 5:59). Hagag said the task force would make up for a lack of coordination between African national armies, and prove a useful tool against the African refugee crisis, forced displacement, and the the threat terrorism poses to national insitutions and infrastructure on the continent.

For your daily dose of business and econ news: El Hadidi, whose show only airs on Sunday and Monday, recapped the recent updates updates on the Saudi Telecom Company’s (STC) bid to acquire Vodafone Group’s stake in Vodafone Egypt, and the Financial Regulatory Authority requiring STC to lodge a mandatory offer for the remaining stake in Vodafone Egypt (watch, runtime: 9:13).

STC likely already knew the MTO would be a requirement, and is likely both capable and willing to purchase Telecom Egypt’s 44.8% stake in Vodafone Egypt, Shuaa Securities’ head of research Amer El Alfy tells El Hadidi. The company is barely leveraged, which means it could easily finance the buyout through debt, even if it doesn’t have liquidity, El Alfy adds. As for willingness to buy, STC is likely to be interested enough in a large and growing market that still hasn’t achieved its potential for broadband penetration, he adds.

M&A WATCH- Is Ahli United Bank looking to sell its Egypt unit? Ahli United Bank could be looking to sell its Egypt arm after its recent acquisition by Kuwait Finance House (KFH), the local press reported, citing unnamed sources. The Kuwaiti bank is required to obtain a separate Islamic banking license from the Central Bank of Egypt (CBE) to operate in the country, the report suggests, adding that the bank is yet to acquire the license and could negotiate an exit from the country. It remains unclear whether KFH has applied for the license.

The news comes amid a rare period of change in the normally staid banking sector. Bank Audi announced last month that it was looking to sell off its Egypt unit, and is currently in negotiations with First Abu Dhabi Bank. State-owned banks Banque du Caire and United Bank are both moving towards privatization, while the National Bank of Greece is presumably still looking for a buyer for its Egypt arm, having seen its sale to Bank Audi fall through last month.

Egypt’s banks are ripe M&A targets, but sales are rare: The country’s banks capitalized on the high interest rate environment that followed the 2016 EGP float by piling into high-yield treasury bonds and bills, resulting in “excessively strong balance sheets” that have made the banks highly attractive acquisition targets. The problem, though, is that only a few are actually up for grabs, Naeem Brokerage head of research Allen Sandeep noted earlier this month.

Potential buyers? A major Saudi bank is looking to acquire a majority stake in an Egyptian bank or receive a new license, while another foreign bank is also inquiring about the Egyptian banking market, Fincorp Managing Director Mohamed Salem said. He noted that the Saudi bank has been waiting for the new Banking Act to pass before making its move. Acquisitions are currently the only way into Egypt’s banking sector, as the CBE has for years denied new banking licenses and has instead pointed potential market entrants to acquisition targets among the country’s 38 licensed banks.

LEGISLATION WATCH- Consumer Credit Act cleared for final vote; House working through a busy legislative agenda: The House of Representatives cleared the way for a final vote on the proposed Consumer Credit Act after the bill won in-principle approval at a plenary session yesterday, reports Al Shorouk. The final vote was postponed due to lack of quorum. The 30-article draft would, if passed, introduce a complete legislative framework regulating consumer finance companies, outline the requirements necessary for their establishment, introduce “detailed” regulations for those in the market, specify conditions in contracts with borrowers, and introduce new financial reporting rules for consumer finance players, according to a memo seen by the newspaper. You can refresh your memory on other key elements of the bill here.

Anti-terror legislation to introduce sharper penalties, wider definition of funding: The House Legislative and Constitutional Affairs Committee has greenlit amendments to the Anti-Terrorism Act that would, if passed in a final vote, enact sharper penalties (up to the death penalty) for funding terrorist groups, reports Ahram Online. The amendments also broaden the definition of what counts as funding terrorist acts to include providing training grounds for terrorists, weapons or documents in any form, or helping terrorists travel. The changes are expected to be discussed in a plenary session today or tomorrow.

Also approved in yesterday’s general assembly:

• An amendment to the recently ratified Social Security and Pensions Act to settle a dispute with several pensioners by allowing them to add the previous five raises to their pensionable pay under the new law (approved in principle);
• Amendments to the the Antiquities Protection Law that would introduce harsher penalties for the illicit trade of artifacts (approved in principle);
• A bill that would set up committees in governorates to organize street parking, as well as legislative stipulations to regulate the job of a ‘sayes’ (street car park attendants);

And in the final piece of legislative news from a rather busy day at parliament: The House Transportation Committee has referred back to cabinet a proposed bill to regulate using inland waterways for shipping and transport for more work, reports the domestic press. The bill, which the government recently proposed, aims to encourage use of the Nile as a transport artery by clarifying licensing procedures and how routes are approved, committee Chair Hisham Abdel Wahed said

PRIVATIZATION WATCH- No official bids yet for for 10% stake in HHD + management: Heliopolis Housing and Development (HHD) is yet to receive any formal offers from investors interested in acquiring a 10% stake with management rights to the company, HHD Chairman Hany El Deeb said, according to the local press. The deadline to submit bids is now Sunday, 23 February, says El Dib, implying the date has been pushed by only two days from what was previously announced. HHD is currently responding to inquiries it had received from interested parties, and is expecting to receive “serious offers” over the next few days.

Eight companies had been reported to have shown interest, including SODIC and BPE Partners, who were the first to purchase the prospectus, along with EFG Hermes, Emaar Misr, and Orascom Development.

What’s next? The company will look into the offers it receives and plans to select the top bid not long after the deadline for submissions. El Deeb had previously said that final contracts will be signed at the end of the quarter.

The parallel plans to sell a stake on the EGX will then follow, with an eye to take the offering to market by 3Q2020, sources cited by the press say. Recent press reports had indicated that the stake size will range from 11-15%, and will only move forward after HHD hands the 10% + management rights to its prospective partner.

M&A WATCH- EFG Hermes, CI Capital, HSBC and Citibank are in the running to advise TE on STC’s Vodafone MTO: Telecom Egypt (TE) has solicited offers from four investment banks to advise the company as it weighs options for its 44.8% stake in Vodafone Egypt, Hapi Journal reports, citing sources close to the matter. The state-owned landline monopoly said last week that it is looking to hire an advisor after the Financial Regulatory Authority (FRA) said that the Saudi Telecom Company (STC) would be required to submit a mandatory tender offer (MTO) for TE’s stake in Vodafone Egypt.

TE has so far received three offers: One from Citibank, one from a CI Capital-HSBC consortium, and another from EFG Hermes, which could potentially partner with Lazard International.

What are TE’s options? The minority shareholder could seek to retain its current ownership, preemptively bid for Vodafone Group’s 55% stake, or sell shares in part or in whole. TE hasn’t yet raised any objections and has signalled that it is not looking to exercise its right of first refusal. Any moves would still heavily depend upon STC’s MTO valuation. Sources with knowledge of the matter who spoke with Hapi Journal suggested that if TE were to seek to sell its stake in Vodafone, it would come in the form of a partial sell off in exchange for a seat at the company’s board of directors.

Telecom Egypt is set to come to a final decision on its financial advisor appointment by next week.

The Financial Regulatory Authority said STC would have to launch an MTO after the Saudi network operator signed a non-binding MoU to for the USD 2.39 bn purchase of Vodafone Group’s 55% stake in Vodafone Egypt late last month. The sale values Vodafone Egypt at USD 4.4 bn and would give STC a 42% share of Egypt’s telecommunications market.

IPO WATCH- Emerald to kick off Egypt’s first (small) IPO of 2020 this week: The Financial Regulatory Authority (FRA) has given real estate investment firm Emerald the green light to list on the EGX and begin its private placement and public offering on Wednesday, Egyptian Real Estate Fund (EREF) CEO Hashem El Sayed tells Al Mal. EREF holds a 50% stake in the company. Emerald hopes to raise EGP 202.3 mn by selling a 28% stake (70 mn shares in total) at EGP 2.89 per share in the transaction, which will be Egypt’s first this year. Amwaj Company for Housing and Project Management and EREF, which each own 50% of the company, will each sell 14% of their holdings.

Advisors: The lead manager is Odin Investments, which is an indirect shareholder in the company through its holdings in the EREF.

Next on the IPO horizon: Banque du Caire (which will offer a 45% stake), e-Finance and Egyptian jewelry brand Egypt Gold have said they plan to make their market debuts during the first six months of the year, while Agriculture and commodities firm Cairo 3A also expects to list at some point this year. The EGX closed 2019 with only two IPOs, with Rameda Pharma going public in December after fintech player Fawry floated in August. Eastern Tobacco’s 4.5% secondary sale in March was the only state-owned company to go to market last year.

Red tape is slowing down export subsidy repayment process, says Edita’s Berzi: Companies that are owed overdue export subsidies are finding it difficult to claim their arrears due to bureaucratic hurdles, despite the government’s recent launch of initiatives to clear the debts it owes to exporters, Edita Chairman and Food Export Council Head Hani Berzi told Hapi Journal. Food exporters alone are still owed over EGP 3 bn, Berzi said, urging the government to come up with a clear schedule for the repayment of these dues. Other export council heads have also called on the government to speed up the repayment process ahead of a meeting that will bring the two sides together to review the EGP 6 bn new export subsidy framework, according to Al Shorouk.

Companies look at alternative options for expedited clearance: Some companies are opting for tax cuts as a faster route to get their arrears, Chairman of the Export Council for Building Materials, Refractories and Metallurgy Industries Walid Gamal told Hapi Journal. He pointed out that companies in the council are owed over EGP 2 bn, which is hindering their expansion plans. Others are also willing to settle their dues by exchanging arrears for industrial land plots, which would likely be an easier process, Chairman of the Export Council for Engineering Industries Amr Abu Farikha told Hapi Journal.

Background: Exporters are owed bns of overdue subsidies under the old subsidies framework, which has been moving forward since last September with the launch of a new EGP 6 bn framework, which includes some EGP 2.4 bn (or 40%) will be doled out as cash payments, EGP 1.8 bn (30%) as tax breaks and cuts, and EGP 1.8 bn (30%) will be spent by the state-run Export Subsidy Fund. Some EGP 790 mn in overdue subsidies to 75 companies have been paid so far and agreements have been signed with 67 other large companies that will see EGP 6 bn paid out over the coming five years as long as they commit to new investments.

The latest settlements: We reported earlier this week that the government will settle overdue subsidies owed to 32 foreign and local companies over five years in exchange for expansions and investments.

INVESTMENT WATCH- Dice is one of the 32 companies upholding its investment promise: Dice Sport and Casual Wear, which signed one of the settlement agreements, is planning to invest EGP 150 mn this year, EGP 120 mn of which will fund the acquisition of six factories in Qalyubia owned by an unnamed ready-made garments company, board member and CFO Victor Fakhry told the press. The asset purchase, which will be financed through equity and a medium-term facility from the CIB, should be completed this week, Fakhry added. EGX-listed Dice will spend the remaining EGP 30 mn to add new lines and increase its production capacity in existing facilities.

Shaker unmoved by calls to cut electricity prices for industry: Electricity Minister Mohamed Shaker rejected several proposals at a meeting with the House Industrial Committee on Sunday to slash electricity prices for factories, Ahram Online reports. MPs Mohamed Farag Amer and Ahmed El Sallab urged the government to lower the prices manufacturers pay, arguing that the high electricity costs are damaging the local industry and holding back production.

Shaker poured cold water on the prospect, saying that the government would face an annual bill of between EGP 6-10 bn for every 10 piasters it subsidizes per Kwh. The ministry may consider making downwards price adjustments only if household consumption falls, he said. The committee also proposed waiving accrued interest on overdue electricity bills, similar to what the central bank has recently done with interest on debt for 5k factories.

This comes after several months lobbying by the Egyptian Federation of Investors Associations for some financial relief from the high cost of electricity. The government set up a committee in October tasked with reviewing energy prices every six months.

Supply Ministry opens commercial registry records to banks through iScore: The Supply Ministry will launch a new service that opens up the records of the Commercial Registry to banks through the credit rating agency iScore on Wednesday, according to Al Shorouk. The ministry had signed an agreement with the Federation of Egyptian Banks and iScore last July to make commercial registry records available through iScore in a move meant to facilitate procedures for investors and merchants .

Polaris Parks-led consortium pulls out of Ain Sokhna industrial project due to delays receiving land: A consortium of Polaris Parks, ARDIC for Real Estate and SIAC Holding has canceled a contract with the Suez Canal Economic Zone (SCZone) to establish a new 5.5 mn sqm industrial zone near Ain Sokhna following delays receiving the land, Al Mal reports, citing informed sources. The company originally planned to have completed the first phase of the facility within two years of signing the contract, which was finalized back in 2017, but the Suez Canal Authority (SCA) has reportedly delayed handing over the land. The authority reportedly offered the company a different plot of land, which it refused because of the presence of an oil pipeline. Shareholders also decided that the project was no longer economically feasible due to falling demand for industrial units.

SCA boss Yehia Zaki dismissed the claims that Polaris had terminated the contract because of delays, claiming instead that the company wanted to focus on its industrial project in Sadat City. Polaris estimated that the zone would attract USD 3.5 bn in investments within 15 years of its completion, providing 50k direct and indirect jobs.

STARTUP WATCH- Vezeeta moves headquarters from Cairo to Dubai: Vezeeta, an app that helps connect patients with physicians, moved its headquarters from Cairo to Dubai late last year, a company spokesperson confirmed to Menabytes. The decision to be based out of Dubai was reportedly made to help Vezeeta attract global talent, but the company appears to have no immediate plans to launch its services in the UAE. It has also reportedly opened an office in California in a bid to sell its software to US hospitals and clinics.

Expansion into Nigeria and Kenya is a possibility; new products are in the pipeline: The company could be launching in both countries within the coming three months, Menabytes quotes unnamed sources as saying. It has hired business operations professional Nana Frimpong as Vice President for Africa, presumably to lead its Africa expansion. Last month, we reported that founder Amir Barsoum had announced plans for the company to enter Africa and south-east Asia for the first time in early February. Vezeeta is also reportedly developing and testing a new medicine delivery service called ePharmacy.

MOVES- Talaat Moustafa Group has appointed Amr El Kady (LinkedIn) as its new managing director and executive vice president, the group said in a bourse disclosure (pdf). El Kady will leave his position as CEO of City Edge Developments, a position he had held since October 2017.

Amid the avalanche of GERD news, the New York Times is out with a visual-heavy story on the history of the Nile river and its centrality to Egypt, dissecting the lifeline along its cultural, economic and political importance to the country — which dates back to sustaining the rise of Pharaonic empires. The piece contextualizes present-day geopolitical tensions with a recap of the long struggle over control of the river.

Human rights are again on the minds of the foreign press this morning following the arrest and detention of Bologna University Graduate student Patrick Zaky at Cairo Airport late last week when he arrived in the country to visit his family. Zaky, an Egyptian citizen, is facing charges including “incitement to overthrow the state” and “promoting terrorist acts,” AFP reports. The Associated Press, the Telegraph and the Guardian have the story.

Canada asks about detained citizens: Canadian Prime Minister Justin Trudeau also said he spoke to President Abdel Fattah El Sisi about Canadian citizens detained in Egypt in their meeting in Addis Ababa earlier this week.

Also worth a skim this morning:

• Egypt and Libya’s diplomatic ties will likely see “more friction and belligerence” this year as they continue to spar over Libya’s future and east Med resources, Nicholas Saidel writes in an opinion piece for the Wall Street Journal.
• FGM still getting attention after the death of a 12-year-old in Assiut: The recent death of a girl due to circumcision has “sparked outrage” in Egypt, and sounded an alarm that FGM is still widespread even after it was banned, says Gulf News.
• Quelling the flow of artifacts being smuggled out of Egypt remains high on the agenda for Egyptian authorities, with legislation and hefty punishments in place following estimated losses of up to USD 3 bn between 2011 and 2014, Arab News reports.

El Sisi meets UN sec-gen Guterres: UN Secretary General Antonio Guterres and President Abdel Fattah El Sisi discussed the ongoing crises in Libya and Syria on the sidelines of the AU Summit in Addis Ababa yesterday, according to an Ittihadiya statement.