HHD expects four bids for 10% stake + management rights

Apple will miss its revenue guidance for the current quarter thanks to the impact on global sales of the coronavirus, and there’s a chance that electronics players the world over will follow suit as stores stay closed, Chinese tourists stay home and supply chains are disrupted. The story tops the global business press today: FT | WSJ | NYT | Reuters | Bloomberg | CNBC.

There are no new cases in Egypt, the global death toll rose again overnight to stand 1,868 at the end of 17 February, and there are now more than 72k cases worldwide, although the rate of new reported patients has slowed the past couple of days.

One hopeful note: Most cases of Covid-19 are mild, a report by Chinese health officials suggests (pdf).

One ominous note: “Doctors studying a 50-year-old man who died in China last month from the new coronavirus found that the disease caused lung damage reminiscent of two prior coronavirus-related outbreaks, SARS and MERS,” according to Bloomberg.

Egyptian event organizers are distancing themselves from China to cool covid-19 fears: Some 250 Chinese companies originally slated to attend three upcoming textiles exhibitions in Cairo are no longer eligible to attend, Vision Group Egypt’s head of expos Haitham Rady tells Al Mal. The move is meant to contain fears over the spread of the covid-19 virus, Rady says.

EGX-listed companies continued the parade of regulatory filings outlining their exposure to China. The companies, which include Raya Holding, Delta Printing and Packaging, and Misr Fertilizers Production Company, have said that no direct contact has been made with Chinese products and manufacturers and there remain no reported cases of covid-19 among their employees, the local press reports.

AUC is celebrating its centennial this week with several events, exhibitions, and conferences. You can find the full list of events here.

The Central Bank of Egypt meets on Thursday to review interest rates: Our poll earlier this week revealed a split among analysts about whether the central bank will leave rates unchanged for another six weeks or resume its easing cycle.

The CBE offered EGP 7 bn-worth of treasury bonds yesterday, including one tranche of 3-year bonds worth EGP 3.75 bn and another 7-year tranche worth EGP 3.25 bn, according to official data.

DP World will go private to tackle swelling debt pile: Dubai plans to privatize port operator DP World to ease its public debt and protect the company from the economic slowdown, Bloomberg reports. The emirate will pay a 29% premium to delist the 19.55% stake from the Nasdaq Dubai stock exchange, valuing the company at USD 13.9 bn. This comes as the company looks to restructure a portion of its USD 23 mn debt pile that matures at the end of 2021.

It remains unclear what implications (if any) this will have on the company’s projects in Egypt: Last we heard, DP World was expecting to finish its USD 520 mn Ain Sokhna port expansion during 2Q2020 and was planning to bid for an upcoming tender for a logistics zone in Tenth of Ramadan.

The UAE is almost ready to fire up the Arab world’s first nuclear reactor: The UAE has the go-ahead to bring online Barakah, the Arab world’s first commercial nuclear power plant and the first of four civilian reactors the UAE plans to bring online by 2023, according to Bloomberg.

The gender gap in the workforce is costing the MENA region around USD 575 bn, World Bank Group President David Maplass said at the Global Women’s Forum in Dubai, which wrapped up yesterday, according to Zawya. Bumping up women’s participation in the region’s labor force to reach parity with men could boost its collective GDP by 47%, Malpass said. The world is also missing out on some USD 172 tn of wealth that could be achieved with 100% gender parity.

The World Bank has offered a bleak prognosis for Lebanon’s financial situation: The Lebanese economy faces “implosion” unless the government takes steps to increase transparency and tackle corruption, a World Bank official said yesterday, according to Bloomberg. “Politicians need to stop and listen,” said Ferid Belhaj, the World Bank’s MENA VP. “You cannot continue doing what you’ve been doing for years when you see what the reaction on the street is and when you see what the state of the economy is.” Protests against the deteriorating economic conditions have been ongoing since October, leading to the resignation of then-prime minister Saad Hariri and increasing pressure on government finances and the country’s teetering financial sector.

Is an IMF bailout on the cards? The global lender of last resort will reportedly begin technical talks with Beirut on Thursday, after the government formally requested assistance from the IMF to address its financial crisis, Reuters reports, citing a source familiar with the matter. The fund may give the financially-stricken country assistance “if we are convinced that there is a seriousness in the approach the government is taking,” IMF chief Kristalina Georgieva told Bloomberg.

UN official unloads on “joke” Libya arms embargo: The arms embargo designed to calm the ongoing civil war in Libya “has become a joke,” a senior UN official has said, accusing several countries who agreed to stop sending weapons into the country last month of breaching the pact.

It’s Groundhog Day — Impeachment Edition: US House Democrats are mulling further investigations into potential wrongdoing from President Donald Trump, who they believe may have influenced the Justice Department to secure a reduced sentence for one of his confidants, according to the Wall Street Journal.

Democrats in Nevada will be voting on Thursday for their pick of contenders to face off against Donald Trump in the US presidential elections this fall. An early voting period — in which voters are being asked to rank the five candidates in order of preference — wraps up today. Vox has a primer on how the voting process will unfold in the Nevada caucus.

National projects, covid-19, and the return of British flights to Sharm featured prominently in last night’s talk shows.

Health Ministry denies we have a second covid-19 patient: The Health Ministry and World Health Organization investigated reports that emerged yesterday suggesting a carrier of the covid-19 virus passed through Cairo Airport in transit, and have so far found no evidence verifying these claims, ministry spokesman Khaled Megahed told Al Kahera Alaan’s Lamees El Hadidi (watch, runtime: 9:28). Lamees’ (slightly more dramatic) other half, El Hekaya’s Amr Adib, called up Minister Hala Zayed for a similar conversation (watch, runtime: 4:16).

Egyptian Wuhan expats are safe and sound: Min Masr’s Amr Khalil sat down with an Egyptian who was among the 617 expats brought home from Wuhan earlier this month, and left quarantine in Matrouh earlier this week for a detailed account of the outbreak since it began in December (watch, runtime: 9:49).

Sharm El Sheikh Airport received yesterday the first two UK chartered flights after British flights officially returned to the Red Sea resort town earlier this week, Masaa DMC’s Eman El Hosary reports (watch, runtime: 2:37). Passengers onboard the flights, which were operated by travel company TUI, arrived to gifts and “festivities.”

El Sisi inaugurates arms factory, several other weapon production facilities: President Abdel Fattah El Sisi inaugurated a weapons factory operated by recently set up arms manufacturer Abu Zaabal Company for Specialized Industries, Al Hayah Al Youm’s Lobna Assal noted in a lengthy segment (watch, runtime: 57:37). El Sisi also inaugurated several other military factories in Benha, Qaha, and Helwan. The story also made it to Masaa DMC, albeit with much more succinct coverage (watch, runtime: 5:48).

EXCLUSIVE- Four companies expected bid for HHD 10% stake + management rights on 23 February: SODIC, BPE Partners, Palm Hills, and the Saudi Dar Al Arkan will all submit bids for the contract to take over the management of Heliopolis Housing and Development (HHD) and acquire a 10% stake in the company, Managing Director Sahar El Damaty told Enterprise. The company has requested that all companies submit their bids on the 23 February deadline to avoid leaks that could sway the company’s decision, she said, adding that the envelopes will all be opened on the same day.

The company remains on track to award the contract during 1Q2020, El Damaty said, adding that HHD has been ready to proceed with the transaction since November but agreed to the deadline extension last month after a request from one of the four candidates.

Background: HHD is seeking to sell a 10% stake to a strategic investor, which will come with management rights for the company for up to 10 years. This is part of the company’s wider privatization plan that will see it then selling 11-15% stake on the Egyptian Exchange by 3Q2020. Eight companies were previously reported to be considering a bid, including EFG Hermes, Emaar Misr, and Orascom Development.

INVESTMENT WATCH- Dragon Oil to invest USD 650 mn in Egypt over the next five years: UAE-based oil and gas company Dragon Oil plans to invest an additional USD 650 mn in Egypt over the next five years by acquiring operating assets in the Western Desert, COO Tayeb Huwair told Hapi Journal without disclosing which units the company is interested in purchasing. The new investments would bring the company’s total capital in the country to USD 1.5 bn.

Company targets 17% increase in oil production: The company plans to increase its production to around 70k bbl/d over the next three years, up from 60k bbl/d currently, Huwair said.

The investment plan comes just over a month after the company wrapped up its USD 500 mn acquisition of BP’s Gulf of Suez assets. BP and Dragon Oil reached an agreement over the acquisition last summer, making the latter the state-owned Egyptian General Petroleum Corporation’s (EGPC) partner contractor in the Gulf of Suez Petroleum Company, a JV that was set up by BP and EGPC to undertake exploration and production operations in the area. Dragon Oil is wholly owned by Emirates National Oil Company.

CORRECTED- 18 February 2019

Dragon Oil plans to invest over the next five years by acquiring assets in the Western Desert and not the Western Sahara. 

M&A WATCH- Bank Audi walks away from NBG assets acquisition amid expected sale to FAB: Bank Audi is no longer interested in taking over the National Bank of Greece’s (NBG) Egyptian portfolio and assets as the Lebanese bank announced last month it’s moving to exit the Egyptian market amid economic turmoil in its home country, Masrawy reports, citing an unnamed Central Bank of Egypt (CBE) source. NBG, which has been on the lookout for acquisition offers from as far back as 2018, hasn’t received any other bids, the source added.

Background: Audi agreed to buy out the Greek bank last May, and said it would seek CBE approval. A dispute between NBG and its employees caused the two banks to miss the CBE’s acquisition deadline late last year. The shakedown failed to derail acquisition talks, and Audi appeared to be closing in on the transaction until the Lebanese banking crisis erupted, prompting Audi to sell the entirety of its Egypt unit and walk away from the NBG bid. Audi opened talks with First Abu Dhabi Bank (FAB) last month to sell its Egypt arm.

Audi is still moving forward with the sale of its online brokerage firm Arabeya Online and has received bids from three interested brokerages, Al Mal reports, quoting sources close to the matter. HC Securities & Investment, Cairo Capital Securities, and a third undisclosed investor have submitted bids, the sources say. HC has already begun its due diligence process on Arabeya, which ranked 12th in the annual brokerage league last year with an estimated 2.2% market share, the sources said. The acquisition would increase HC’s market share to almost 5%, making it the fifth-largest brokerage in Egypt based on last year’s figures.

INVESTMENT WATCH- EBRD and IFC are among backers of a new greenfield hospital in Alexandria. Al Batterjia Medical Group, a corporate cousin of Tadawul-listed Saudi-German Hospital Group, will build a greenfield hospital in Alexandria and another in Morocco’s Casablanca with USD 125 mn in financing from lenders including the European Bank for Reconstruction and Development, according to an EBRD statement (pdf). The shariah-compliant funding takes the form of a “commodity murabaha.” Participants in the transaction also include the International Finance Corporation, the OPEC Fund for International Development, and the Finnish Fund for Industrial Cooperation.

LEGISLATION WATCH- We’re one step closer to having someone in charge of regulating roadside ads and billboards (including their content): The House Housing Committee has signed off on proposed amendments to a law regulating billboards on roads and bridges, according to Al Mal, which has the full text of the bill. The changes, which were approved by cabinet in 2018, would set up a National Advertising Regulatory Authority to set regulations for the issuance of licenses for new billboards — and to regulate content in the ads and hand out fines to violators. The bill will now be referred to the House of Representatives’ general assembly for a final discussion and vote before being signed into law by the president.

REGULATION WATCH- Central bank raises ceiling on mortgages as a percentage of bank loan books: Mortgages can now make up 10% of commercial banks’ lending portfolios, up from 5% previously, according to a circular issued by the Central Bank of Egypt (CBE) earlier this week. The change comes as the CBE is finalizing a program that will give middle-income homebuyers access to subsidized mortgages on houses valued at up to EGP 2.25 mn ahead of launching the program in March, we noted earlier this month. The EGP 50 bn program was announced in December, and is a continuation of a previous CBE initiative that ran from 2014 until January 2019.

REGULATION WATCH- Did the FRA just make reverse takeovers (aka: “reverse IPOs”) possible? The Financial Regulatory Authority (FRA) has made two amendments to EGX listing regulations that allow publicly-traded companies to acquire larger non-listed companies, according to an official statement (pdf). Under the new rules, EGX-listed companies can go after privately-held businesses whose value is equal to or greater than that of the buyer, provided the target of the acquisition meets all of the EGX’s listing regulations within one month of the transaction closing. If the transaction results in the proportion of the listed company’s shares falling beneath the freefloat threshold, it will be granted a one-month grace period to issue more shares.

The FRA will also require companies to seek the approval of their general assemblies if they refuse to contribute to a capital increase of a subsidiary in which they hold a 10% stake or more. Officials say the move is intended to “better protect the rights of shareholders from unilateral action by company board”

REGULATION WATCH- We have more details on the Mineral Resources Act’s exec regs: Additional details have been released on the executive regulations to the amended Mineral Resources Act, according to a document obtained by Enterprise. Among the key regulations:

Royalty payments: We had reported last month that private mine and quarry operators will pay out royalties of up to 10%, income tax of 22.5%, and EGP 25k a year per sq km in concession rent under the bill. The document we reviewed shows that royalties will be payable to the Egyptian Mineral Resources Authority (EMRA) according to the type of mine. The royalty rates apply to 10 types of minerals — including gold, mica, zinc, copper, iron, and phosphate — to compensate for extraction, with the rate varying depending on the material. Companies will also pay 1% of the value of annual production for mines and 6% for quarries. This payment will be made directly to the governorate in which the mine or quarry is located.

Issuing and renewing licenses: Exploration licenses will be granted for two years at a time and will be eligible for renewal up to three times. Rent increases of EGP 5-20k per sq km will be applicable after each renewal. Rent can also be changed outside that timeline every three years through a decree from the prime minister, and based on proposals from EMRA and the Oil Ministry. Licensees will need to submit their exploration proposal within 60 days of receiving their license.

Exploitation licensees will pay an annual rate of EGP 25k per sqkm, and EGP 9 per sqm for white sand. They will also pay an insurance amount equal to the rental value within 30 days of notification. Companies will also pay EGP 15k per sqkm for lands used outside the licensed area for industrial or storage purposes (Article 85).

Egypt awarded its first new gold exploration license in 15 years to Aton Resources, we reported on Sunday. The Vancouver-based company will prospect for gold in the Eastern Desert’s Hamama region under a 20-year license with an additional 10-year option period. The company will also retain rights to explore in the Abu Marawat concession area in the Arabian-Nubian Shield, north of Sukari mine, where existing player Centamin is operating.

The gov’t will also launch an international gold exploration and mining tender for areas in the Eastern Desert by the end of this month or early March. It will be the first mining tender since the Mineral Resources Act was amended last year and the first for gold exploration since 2017. Centamin is currently the only company producing gold in Egypt from its Sukari mine, while Aton Resources and Thani Stratex Resources are still exploring concession areas but are yet to strike gold. Centamin achieved an 8% bump in production in 2019 (pdf) and plans to increase this figure by at least another 6% to 510k oz this year. The gov’t hopes the tender will boost investment in the sector, raising contribution to GDP to EGP 7 bn by the end of the decade.

Background: The amended act was ratified by President Abdel Fattah El Sisi last August. Besides introducing the new model, it stipulated that royalty payments cap at 20%, and introduced a minimum of 5%. It also outlines the responsibilities of the newly-established committee that will advise on the royalty rate for each raw material, as well as the new authority empowered to issue licenses to, and withdraw them from, governorates.

EARNINGS WATCH- Banque du Caire’s (BdC) net profits jumped 60% y-o-oy to EGP 6 bn in 2019, according to Mubasher. The bank is on track to sell a 45% stake to investors in the first IPO under the state privatization program, which was announced back in 2018. BdC’s shares could start trading on the EGX by the middle of April, local press reports suggested earlier this month.

MOVES- International healthcare firm Novo Nordisk has appointed Ayman Hassan as its new VP and general manager for Egypt, the company said in a statement (pdf) yesterday. Hassan has almost 25 years’ experience in the industry and has been with the company since 2000.

MOVES- Ahmed Eraqi (LinkedIn) stepped down last week from his role as the executive manager of Swvl, reports Al Mal. Eraqi joined the Dubai-based Egyptian mass transportation company’s management team in 2018.

This morning in the foreign press: Egyptian authorities have launched a criminal investigation into Patrick Zaky, an Egyptian researcher who was detained earlier this month on charges of inciting against the state, Reuters reports. The public prosecutor’s office is now investigating the graduate student for allegedly “broadcasting false news aimed at disrupting security and social peace and for using the internet to disrupt public order and endanger society,” it said in a statement.

Egypt has struggled to contain the rapid growth of its population due to governance shortcomings and lack of a clear family planning strategy, Timothy Kaldas writes for Bloomberg Opinion.

Also getting traction in the foreign press:

• Gold mining tender gets coverage: Bloomberg picked up last week’s news that the government is planning to launch a gold exploration tender in March.
• Dar Al-Ifta telling Egyptians to stop watching Turkish TV dramas due to national security concerns is raising eyebrows, according to Al Monitor.

Investors union says no to Canada joining the QIZ: The Egyptian Federation of Investors Associations’ board of directors has voted against a request from Egypt’s trade office in Canada to include the North American country in the Qualified Industrial Zones (QIZ) export agreement, the federation’s acting head Moharram Helal said. Helal gave no reasons for the rejection. Participants in the 2004 QIZ agreement are granted no-tariff access to the US market provided they meet a minimum required amount of Israeli content.

The Education Ministry is looking for domestic and international partners to construct 100 technical schools across the country by 2030, Deputy Education Minister for technical training Mohamed Megahed, tells the local press.

Egypt’s Thrawaat International Investment Corp has signed a USD 450 mn partnership contract with the Saudi Hospitality Development Group (HDG) to manage Swiss International, its Swiss hotels and resorts brand, Masrawy reports The agreement will see eight hotels in Cairo, Hurghada, Sharm El Sheikh, Marsa Alam, Luxor, Aswan and the North Coast added to Swiss International’s portfolio within the next two years, said Thrawaat founder Ahmad Awad.

The new expansion of Sphinx Airport will raise the airport’s capacity to reach 900 passengers per hour and 1.2 mn passengers annually, Civil Aviation Minister Mohamed Anba said, according to the local press. The government began working on expanding the airport to accommodate an anticipated increase in tourist arrivals, particularly as the Grand Egyptian Museum is set to be opened this year.

EFG Hermes is looking to consolidate its leasing and factoring arms into one entity, EFG Hermes Leasing CEO Ahmed El Kholy tells the local press. The company’s current financial leasing portfolio is worth some EGP 3.5 bn, 16% of which is focused on SMEs.

The National Bank of Egypt, CIB and Emirates NBD are piloting an automated know your customer system (e-KYC), Federation of Egyptian Banks President Hisham Ezz El Arab told Hapi Journal. The federation plans to roll out the system to all banks this year using blockchain technology. E-KYC facilitates the authentication and registration of customers, and allows the data to be shared seamlessly between banks, by eliminating the need for filling out or submitting physical documents.

DHL Express will open six new branches in Egypt this year and increase its aircraft count to four by the end of the year from one currently, the company said in a statement (pdf) following CEO John Pearson’s meeting with Prime Minister Moustafa Madbouly. The international courier has already invested EGP 1 bn into its Egyptian operations and plans to increase this further, the statement says without disclosing a specific figure.

Mahraganat singers barred from performing at festivals, concerts: The Egyptian Musician Syndicate has issued a decree banning all Mahraganat (electronic folk) performances at festivals, clubs, concerts, cafes, and other venues. Syndicate head Hany Shaker attributed the decision to the music’s “promiscuous and immoral lyrics,” and said it “does not represent Egypt” (watch, runtime: 4:09).