Aldar, ADQ launch bid for SODIC

Good morning, ladies and gents-

We’ve got a whole lotta M&A for you this morning: From Aldar and ADQ finally showing their hand with their SODIC takeover bid, to Elsewedy Electric’s takeover of a local cablemaker, to ADQ finalizing its acquisition of a 75% stake in Atyab owner Ismailia Agricultural and Industrial Investments, we have an epic M&A Watch just down below.

Dominating the conversation internationally: It looks like the Biden administration is about to confiscate some of our aid due to human rights conversation. More on this in the Politics section, below.

WHAT’S HAPPENING TODAY-

EFG Hermes’ fourth Virtual Investor Conference continues today, running through to 21 September with the theme of “After Reflation — FEMs in 2022.”

It’s day six of the CIB Egyptian Squash Open: The bottom half of the women’s and men’s quarter-finals will be played today, before the semis kick off tomorrow. The final will be played on Friday 17 September. You can find the schedule here.

It’s the final day of the Sahara Expo: The five-day agricultural conference is being held at the Egypt International Exhibition Center.

THIS WEEK-

Tomorrow is interest rate day here in Egypt and all 10 analysts we polled expect the central bank to leave rates on hold for a seventh consecutive meeting when it meets on Thursday. Analysts pointed to the uptick in inflation and the pressure to maintain foreign inflows into Egyptian debt.

The UN Security Council is preparing to issue an imminent statement on the dispute over the Grand Ethiopian Renaissance Dam (GERD), Al Shorouk reports, citing informed sources.

But by the sounds of it, it won’t contain anything particularly groundbreaking: Sources say that the statement calls on Egypt, Ethiopia and Sudan to return to African Union-led negotiations and finalize a binding agreement on the filling and operation of Ethiopia’s hydropower mega-project on the Blue Nile.

This is exactly what the council said in July when world powers took a neutral position on the conflict and backed the AU process, despite concerted lobbying by Egypt and Sudan for a stronger stance against Ethiopia, which recently completed the second filling of the dam’s reservoir in July. GERD talks have been gridlocked in recent months after Sudan and Egypt lost faith in the AU as a mediator and called for new players to be brought in to mediate the process. Ethiopia has refused and wants to continue with the current format.

The Egyptian-Libyan Higher Committee is set to meet for the first time since 2009 on Thursday. A statement from the Libyan ministry of economy and trade says that the committee meeting is scheduled for Thursday 16 September in Cairo. Meanwhile, Egypt’s International Cooperation Ministry announced the start of preparatory sub-committee talks ahead of the session. The committee was revived this spring following the restoration of official ties between Egypt and Libya.

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

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MARKET WATCH-

Fed gets a breather as US inflation slows: US consumer prices rose at a slower rate in August, fresh data from the Bureau of Labor Statistics showed yesterday. In line with expectations, annual CPI inflation slowed to 5.3% last month from 5.4% in June and July, in an indication that the recent upward trend has peaked.

Sighs of relief were likely heard over at the US Federal Reserve at the softest increase in CPI in seven months ahead of its September meeting. Pressure had been building on the Fed to take a more hawkish stance to combat inflation by accelerating the taper of its bond-buying stimulus in order to start raising interest rates next year.

That said, prices are still rising, with some analysts pointing out that one month of cooler CPI figures will not put inflationary worries to bed. “The ‘is it transitory debate’ is far from over but at least, this more moderate gain in consumer prices will give the Fed some breathing room next week,” one senior economist told Bloomberg. “But not for long.”

*** IN CASE YOU MISSED IT-

• Apple releases emergency iPhone update: The company pushed out the software update after they uncovered a “zero-click” ransomware attack that runs through iMessage.
• Are we creeping towards a continuous working week? The downside to our WFH experiment may be increased working hours and blurred boundaries between paid work and personal life.
• Meet our analyst of the week: Aya Samy, senior investment analyst at Misr Capital.

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Apple unveiled a few new updates to some of its flagship products in its “California Streaming” event yesterday. Here’s what the company’s rolling out as the holiday season approaches:

A new iPhone: The new iPhone 13 models held few surprises, as the company announced performance updates to the iconic smartphone in lieu of groundbreaking new design features. The iPhone 13, which will cost at least USD 699 (and USD 999 for the iPhone 13 pro), looks basically the same as the iPhone 12 but boasts a chip that Apple says is 50% faster than competitors, a higher-quality camera, and a smaller cutout at the top of the display screen.

The 9th generation iPad: The updated iPad comes with the new A13 bionic chip, which Apple says is 20% faster than the older A12.

A bigger watch: The seventh generation of Apple’s smart watch boasts a bigger screen, faster charging and new colours.

What we didn’t get: There was no update on AirPods, nothing on Macs or Macbooks, nor on the anticipated addition of satellite capabilities to the iPhone.

You can rewatch Tim Cook’s keynote here (watch, runtime: 1:18:46).

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, to social infrastructure such as health and education.

In today’s issue: Following five years of falling demand, local consumption of cement is finally starting to pick up and prices are rising. But with increasing input prices squeezing margins and the jury still out on the effectiveness of the new supply cuts, the sector remains under pressure.

The UAE’s Aldar Properties and sovereign wealth fund ADQ has submitted a mandatory tender offer for up to 90% of upmarket real estate developer SODIC, they said in a disclosure (pdf) to the ADX yesterday. The all-cash offer saw the consortium — which is 70% owned by Al Dar and 30% owned by ADQ — up its offer to EGP 20 per share from a previous range of EGP 18-19, and values SODIC at EGP 7.1 bn (USD 453 mn). This offer increase represents an 18% premium over the three-month volume-weighted average price of EGP 16.88.

SODIC’s share price closed up 3.7% during trading yesterday, while Aldar shares fell 0.2%.

What now? The MTO is awaiting approval by the Financial Regulatory Authority (FRA) which said yesterday (pdf) that it is currently studying the offer. If approved, SODIC’s shareholders will have 10-30 working days to respond to the offer. SODIC declined to comment when approached by Enterprise.

SODIC’s shareholders are weighing their options: “We’re assessing all the alternatives and all the strategic options and then we’ll decide,” Karim Nehma, managing partner at Act Financial, told us. Act is part of a consortium with Hassan Allam Properties and Concrete Plus Engineering and Construction that together is the company’s single largest shareholder, owning a 15% stake. Olayan Saudi Investment holds 14%, while the Abanumay family has 10% and Ripplewood 9%.

Aldar’s interest in SODIC is a vote of confidence in the Egyptian real estate sector and has erased any doubts investors may have had about the value of the sector, Nehma said. These doubts are why the real estate sector in Egypt has been underperforming and undervalued, he added. Nehma said the company’s stocks, like many in Egypt, are undervalued, which is why Egyptian stocks are now getting attention for acquisitions in multiple sectors.

This acquisition has been in the works for over six months: Aldar submitted a non-binding offer back in March to acquire 51% of Sodic’s shares, the offer initially valued the company at EGP 6.6 bn.

More acquisitions in the pipeline? The potential SODIC acquisition “is a part of Aldar’s overall expansion strategy into the attractive Egyptian real estate market, with Aldar currently assessing several opportunities,” it said in the disclosure.

Aldar has been signalling it will make a move into the Egyptian market for a while now: Aldar CEO Talal Al Dhiyabi had in 2019 said the company was eyeing investments in Egypt’s real estate market. Aldar’s new operating model announced earlier this year grants its development business “a mandate to expand its operations into the Egyptian market to pursue attractive long-term opportunities, particularly in the development of integrated mixed-use communities,” according to an earlier disclosure.

The story got significant coverage in the foreign press: Reuters | The National | Khaleej Times

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In other news on ADQ’s Egypt takeover: The fund’s food subsidiary Agthia has finalized its acquisition of 75% of Atyab brand owner Ismailia Agricultural and Industrial Investments and received the shares yesterday, according to a statement (pdf) from Matouk Bassiouny & Hennawy (MBH), Agthia’s local counsel in the transaction. The MBH statement did not disclose the final value of the acquisition, which was previously reported as being worth up to EGP 3.2 bn.

Frozen meat and poultry, and beyond: “The successful closing of the transaction furthers Agthia’s goal towards becoming the leading FMCG [fast-moving consumer goods] player in the MENA region,” the statement read. The takeover had been pending regulatory approval since April, when it was given the greenlight by the company’s board.

Advisors: Freshfields Bruckhaus Deringer joined MBH as local counsel to Agthia, while EFG Hermes was the company’s financial advisor on the transaction. Adsero-Ragy Soliman & Partners, meanwhile, advised Ismailia, and First Capital Financial Advisory was financial advisor to the Egypt-based target.

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ALSO FROM SODIC- SODIC subsidiary Tabrook Development will develop a 280-feddan plot on the North Coast — east of the company’s Caesar development — under the terms of a partnership agreement signed with Shahin’s Owners Union, SODIC announced in a press release (pdf) on Monday. The agreement entitles the landowner to a 15% of the cash generated from projects on the plot along with the EGP 2.7 bn to be paid over 12 years.

This agreement replaces the company’s revenue sharing agreement for two adjacent plots with a total land area of 308 feddans on the North Coast, signed in March 2018, under which the landowner receives a 28% share of the project’s revenues from unit sales.

SODIC acquired Tabrook Development in March 2015 in an EGP 191 mn transaction (pdf).

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OTHER M&A NEWS – Elsewedy Electric has acquired 99.25% of Egypt-based cablemaker International Cables Company (ICC) for EGP 410 mn, Al Mal reports, citing unnamed sources. The two companies in July signed a sale and purchase agreement that was pending regulatory approval. ICC employs some 400 people and produces low-, medium- and high-voltage cables as well as telephone cable at a facility in the Tenth of Ramadan industrial zone.

More acquisitions in ElSewedy’s pipeline? The company’s M&A director, Ahmed Nabil, previously said it was aiming to close three transactions in the second half of the year, and was looking at unidentified technology, electric equipment and cable makers.

Advisors: Al Ahly Pharos was financial advisor to the selling shareholders. Our friends at Alieldean Weshahi & Partners were counsel to Elsewedy, while Al Kamel Law Firm had sell-side duty.

Two banks want almost all of Valu’s securitized bond issuance: The Suez Canal Bank and the Arab African International Bank (AAIB) are looking to snap up almost 90% of the EGP 323 mn maiden securitized bond issuance by EFG Hermes’ consumer finance arm Valu, Suez Canal Bank Chairman Hussein Rifai told us yesterday. The two banks submitted offers worth EGP 145 mn each.

Earlier this week, Valu kicked off its EGP 2 bn securitization program with a EGP 323 mn bond issuance, which was given an investment-grade prime-1 rating by Middle East Rating Services. The two banks acted as underwriters on the issuance and AAIB acted as custodian. This issuance received “significant interest” from financial providers, Mostafa Gad, co-head of investment banking at EFG Hermes said (pdf).

IN OTHER DEBT NEWS-

The AAIB has signed a medium-term financing agreement worth EGP 1.3 bn with Sky Investments and Misr Real Estate Assets Management to complete the Park St. restaurant and retail development in Sheikh Zayed, according to a statement (pdf). AAIB acted as the lead arranger, underwriter and account bank in the agreement, while its subsidiary Arab African International Leasing acted as the guarantor.

The Biden administration will withhold USD 130 mn of military aid it gives to Egypt due to its human rights record, unnamed US officials told Reuters and Politico yesterday. In a move designed to pressure the Egyptian government to improve the human rights situation, the sources say that Secretary of State Anthony Blinken will hold back almost half of the USD 300 mn of Egypt’s aid that comes with human-rights-related conditions.

The official claims “some — but not most” of the funding will be withheld and that “the money that is being sent will also have restrictions on its use,” positioning the move as a “compromise” that may still disappoint lawmakers and activists concerned about Egypt’s human rights record.

A symbolic move? This is only a fraction of the USD 1.3 bn the US gives to Egypt every year. Blinken will also still allow Egypt to receive USD 170 mn in aid that is supposed to be conditioned on the government meeting certain human rights standards. The common practice by successive US administrations is to override these rules and disburse the money irrespective of whether these standards are being met.

The money will be withheld until Egypt meets certain human rights conditions, the officials said, without providing specifics.

And the money we are getting won’t be fully at our disposal: The US has determined that the sum should be used for counterterrorism, border security and non-proliferation.

But we could still get the full amount: “If they complete the human rights criteria that we laid out for the Egyptians, they also get the USD 130 million,” a US official told the Washington Post. The conditions for disbursing the aid include closing a case against NGOs and civil society workers — including 16 Americans — on charges of receiving unauthorized foreign funds. Last month, a Cairo court announced it had dropped charges against four NGOs in the longstanding foreign funding of civil society case, a move that was expected to help ease tensions between Egypt and the US.

The Biden admin hasn’t been shy about criticizing Egypt’s human rights record: The Biden team put human rights concerns at the center of his foreign policy proposals during the 2020 presidential election, and since being elected his administration hasn’t been shy about criticizing Egypt’s record. His government has spoken of “concern” about the targeting of civil society members, academics and journalists, and has urged the government not to target individuals for peacefully expressing views.

Egypt has sought to side-step the scrutiny by upping its game regionally, playing a major role in brokering a ceasefire between Hamas and Israel earlier this year and strengthening ties with Tel Aviv. President Abdel Fattah El Sisi’s meeting with Israeli PM Naftali Bennett — the first time an Israeli leader has made an official visit to Egypt in more than a decade — is likely to please Washington, which wants to improve ties between Israel and the Arab world, Politico says.

The story is dominating coverage on Egypt in the foreign press this morning: Politico | Reuters | Washington Post | The Hill | Times of Israel

Falak Startups has appointed Ahmed Hazem Dakroury (LinkedIn) as its new CEO, the company announced in a statement (pdf). Dakroury had previously been Falak's head of investment for two and a half years, and will succeed Yousef El Sammaa (LinkedIn), who founded the company in 2017 and has been leading it since.

It’s not often that we can say that the airwaves were covid-free, but yesterday the nation’s talking heads managed to go the whole night without any talk of vaccines, delta, or the fourth wave. Instead, their focus was on the release of the UNDP’s Egypt Human Development Report 2021, the first such report to be released by the UN body following a ten-year hiatus. Kelma Akhira (watch, runtime: 3:34 | 2:18 | 3:28), Ala Mas’ouleety (watch, runtime: 6:20) and Al Hayah Al Youm (watch, runtime: 3:19) all had coverage of President Abdel Fattah El Sisi’s remarks (watch, runtime: 15:18) upon the report’s launch.

Planning Minister Hala El Said phoned in to discuss the importance of the UNDP report with Kelma Akhira’s Lamees El Hadidi (watch, runtime: 6:04 | 8:55 | 15:00) and Yahduth Fi Masr’s Sherif Amer (watch, runtime: 4:50).

A potential cut in US aid to Egypt was also covered: Ala Mas’ouleety’s Ahmed Moussa commented on reports that the Biden administration will withhold USD 130 mn of military aid it gives to Egypt due to its human rights record (watch, runtime: 12:45). We have more on the story in this morning’s Politics section, above.

Never ones to ignore a good bit of Egyptology news, the foreign press was all over yesterday’s opening of the newly restored tomb of King Djoser in Saqqara. The renovation of the 4,700 year-old cemetery complex, also known as the Southern Tomb, began in 2006. Its completion comes on the back of a string of recent announcements of new discoveries in Saqqara and a Netflix documentary on the team of Egyptian archaeologists unearthing its riches. Egypt’s tourism ministry marked the opening with a video including footage of the inside of the tomb (watch, runtime: 0:59). Reuters reported the story, while Bloomberg, the Washington Post and ABC News all picked it up from the AP.

Also making headlines:

• Human rights: The trial began yesterday of Egyptian human rights advocate and University of Bologna student Patrick George Zaki, who has been in detention for a year and a half. (AP)
• Barrick pins growth hopes on Egypt mines: Canadian miner Barrick Gold will focus on exploring for new mines in Egypt, Nevada and Guyana as the main driver of its growth strategy, CEO Mark Bristow told Reuters.
• The ancient four-legged whale resurfaces: Remember our long read on the Egyptian paleontologists who unearthed a new species of prehistoric amphibious whale? Now the international press is paying attention, too. (AP)

The government has allocated EGP 8 bn for export subsidies during the current fiscal year, after having paid out EGP 28 bn in arrears to exporters between March 2020 and June 2021, Finance Minister Mohamed Maait said in a statement.

The Egyptian Natural Gas Holding Company (EGAS) and the Egyptian Petrochemicals Holding Company (ECHEM) signed a MoU with Toyota to study the possibility of producing the low carbon fuel ingredient blue ammonia.

Tourism workers in Cairo and Giza are up next for jabs: Vaccine registration for tourism sector employees in Cairo and Giza will open this week, head of the Tourism Chamber at the Federation of Egyptian Industries Adel Elmasry told Al Mal,

Some 60% of tourism workers in other governorates have already been vaccinated, he said. The government announced in May that it had completed the vaccination of tourism workers in the Red Sea governorate.

The Health Ministry reported 503 new covid-19 infections yesterday, up from 491 the day before. Egypt has now disclosed a total of 293,951 confirmed cases of covid-19. The ministry also reported 10 new deaths, bringing the country’s total death toll to 16,895.

El Sisi meets eastern Libyan officials Haftar, Saleh: President Abdel Fattah El Sisi met with Libyan General Khalifa Haftar and the speaker of the Tobruk-based House of Representatives Aguila Saleh in Cairo on Tuesday, according to an Ittihadiya statement. El Sisi reiterated Egypt’s support for Libyan efforts to hold presidential and parliamentary elections by the end of the year, and repeated calls for a stop to all foreign interference in the country. The meeting came two days before the Egyptian-Libyan Higher Committee meets for the first time since 2009.

10-17 September (Friday-Friday): CIB Egyptian Squash Open, Giza.

12-15 September (Sunday-Wednesday): Sahara Expo: the 33rd International Agricultural Exhibition for Africa and the Middle East.

13-21 September (Monday-Tuesday): EFG Hermes’ fourth Virtual Investor Conference.

14-30 September (Tuesday-Thursday): 76th session of the UN General Assembly, New York.

15 September (Wednesday): The CFO Leadership & Strategy Summit is taking place in Egypt.

16 September (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

18 September (Saturday): Expiration of United Nations Investigative Team to Promote Accountability for Crimes Committed by Daesh/ISIL

21-22 September (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

22-25 September (Wednesday-Saturday): Cityscape Egypt, Egypt International Exhibition Center, Cairo, Egypt.

29 September (Wednesday): DevOpsDays Cairo 2021 is being organized by ITIDA and the Software Engineering Competence Center in cooperation with DXC Technology, IBM Egypt and Orange Labs.

30 September-2 October (Thursday-Saturday): Egypt Projects 2021 expo, Egypt International Exhibition Center, Cairo, Egypt.

30 September-8 October (Thursday-Friday): The Cairo International Fair, Cairo International Conference Center, Cairo, Egypt.

30 September: Closing of 2021’s first oil and gas tender in the Gulf of Suez, Western Desert, and the Mediterranean.

30 September (Thursday): First tranche of overdue subsidy payouts will be handed to eligible exporters.

October: New legislative session begins — must be held by the first Thursday of October.

October: Romanian President Klaus Iohannis could visit Egypt in mid this month to discuss ways to boost tourism cooperation between the two countries.

1 October (Friday): Businesses importing goods at seaports will need to file shipping documents and cargo data digitally to the Advance Cargo Information (ACI) system.

1 October (Friday): Expo 2020 Dubai opens.

1 October (Friday): State-owned companies and government service bodies selling goods and services to customers that have not yet signed on to the e-invoicing platform will suffer a host of penalties, including removal from large taxpayer classification, losing access to government services and business, and losing subsidies.

6 October (Wednesday): Armed Forces Day.

7 October (Thursday): National holiday in observance of Armed Forces Day.

9 October (Saturday): Public schools begin 2021-2022 academic year

11-17 October (Monday-Sunday): IMF + World Bank Annual Meetings.

12-14 October (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

18 October (Monday): Prophet’s Birthday.

21 October (Thursday): National holiday in observance of the Prophet’s Birthday.

24-28 October (Sunday-Thursday) Cairo Water Week, Cairo, Egypt.

27-28 October (Wednesday-Thursday) Intelligent Cities Exhibition & Conference, Royal Maxim Palace Kempinski, Cairo, Egypt.

28 October (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

28 October (Thursday): Second tranche of overdue subsidy payouts will be handed to eligible exporters.

30 October – 4 November (Saturday-Thursday): The first edition of Race The Legends, Egypt.

November: The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.

November: Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which can significantly contribute to increasing the volume of Egyptian exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

1-3 November (Monday-Wednesday): Egypt Energy exhibition on power and renewable energy, Egypt International Exhibition Center, Cairo, Egypt.

2-3 November (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

1-12 November (Monday-Friday): 2021 United Nations Climate Change Conference (COP26), Glasgow, United Kingdom.

16-17 November (Tuesday-Wednesday): Africa fintech summit, Cairo.

26 November-5 December (Friday-Sunday): The 43rd Cairo International Film Festival.

29 November-2 December (Monday-Thursday): Egypt Defense Expo, Egypt International Exhibition Centre.

7-8 December (Tuesday-Wednesday): North Africa Trade Finance Summit.

12-14 December (Sunday-Tuesday): Food Africa Cairo trade exhibition, Egypt International Exhibition Center, Cairo, Egypt.

13-17 December: United Nations Convention against Corruption, Sharm El Sheikh, Egypt.

14-19 December (Tuesday-Sunday): The Cairo International Festival for Experimental Theater.

14-15 December (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

16 December (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

14-16 February 2022 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

1H2022: The World Economic Forum annual meeting, location TBD.

22-24 April 2022: World Bank-IMF spring meeting, Washington D.C.

May 2022: Investment in Logistics Conference, Cairo, Egypt

16 June 2022 (Thursday): End of 2021-2022 academic year for public schools

27 June-3 July 2022 (Monday-Sunday): World University Squash Championships, New Giza.

**Note to readers: Some national holidays may appear twice above. Since 2020, Egypt has observed most mid-week holidays on Thursdays regardless of the day on which they fall and may also move those days to Sundays. We distinguish below between the actual holiday and its observance.