AM — Aldar + ADQ’s bid to acquire SODIC gets regulatory approval

Good morning, everyone, and happy hump day. It’s a great day for capital markets after the FRA gave its long-awaited blessing to the UAE’s Aldar and ADQ to go ahead with their bid to acquire upmarket developer SODIC. Also a must-read this morning is our Going Green piece on the future of Egypt’s plans to roll out electric vehicles nationwide after the breakup with China’s Dongfeng — see it as a chance to bring in a more compelling partner. Oh, and did we mention your next iPhone is going to cost a bit more?

Further afield: The leader of Ethiopia says he’s literally going to the front lines to take on rebels who are advancing on his capital — and Elon Musk has fired a broadside at JPMorgan’s Jamie Dimon … likely from his toilet.

All of this and more below.

PSA: School’s off again in Alexandria. Alexandria has given public and private schools the day off today and has told non-essential public sector workers to stay home as authorities work to clear the streets following the deluge of rain yesterday. We have more in Last Night’s Talk Shows, below.

THE BIG STORY IN THE GLOBAL BUSINESS PRESS- Jay Powell looks set to stay on at the helm of the Federal Reserve for another four years after President Joe Biden opted for continuity and nominated him for a second term yesterday. Lael Brainard, Powell’s main rival for the top spot at the central bank, has been appointed vice-chair and will replace Richard Clarida when the new term starts in February.

A safer pair of hands? The decision to stick with Powell sends a message to the market that a) the Biden administration recognizes the importance of policy continuity in uncertain times and b) the world’s most powerful central bank will remain unafraid to confront inflation and tighten policy if necessary. Powell has overseen a historic monetary policy response to the pandemic and guided the economy through one of the swiftest and deepest recessions on record. He was the market’s preferred candidate to steer the ship as inflation reaches multi-decade highs and supply chain snarls show no sign of ending. Under his leadership, the central bank has begun to do just that, reducing its huge asset-purchase programme this month and signalling that more could be done if the problems persist.

The new vice-chair: Brainard, the pick of liberals and progressives in the Democratic Party, is to the left of Powell on issues including regulation and climate change, and though she talked of the importance of reining in inflation, market sentiment had her as a dove: more tolerant of higher inflation and more hesitant to dial back monetary stimulus.

There was a positive reception from the markets, with US stocks rising following the announcement and Wall Street execs praising the decision. “Of course everybody was relieved,” bn’aire hedge fund manager Marc Lasry said. “The markets believe that he will do what is necessary to keep the markets calm and have them move forward.”

But there was still time for a late-day reversal: While US stocks rose initially after the announcement, indexes turned negative in the final hour of trading and bonds sold off. The Nasdaq fell more than 1% while the S&P 500 dropped 0.3%. The yield on 10-year treasuries climbed seven basis points and the greenback strengthened.

The story is everywhere this morning: Bloomberg | FT | Reuters | CNBC | Washington Post | New York Times.

MEANWHILE- The 2019 Nobel Prize winner is going full Braveheart: Ethiopian Prime Minister Abiy Ahmed is apparently heading to the battlefront, pledging yesterday to lead his troops into battle against Tigray rebels that have in recent weeks advanced closer to the nation’s capital and threatened to plunge the country into all-out civil war. “Starting tomorrow, I will mobilize to the front to lead the defence forces,” he wrote in a statement on social media. “This is a time when leading a country with martyrdom is needed.”

Ethiopian government forces have been fighting a year-long war against rebels in the Tigray region, which has sharply escalated in recent weeks. The government declared a six-month state of emergency earlier this month and urged people living in the capital to arm themselves and protect their neighborhoods. “This is so extraordinary and unprecedented, shows how desperate the situation is,” Awol Allo — the man who nominated Ahmed for the Nobel prize — wrote in a tweet. (AFP | Washington Post | The Guardian)

SIGN OF THE TIMES #1- The SAT — and standardized testing in general — just got dealt another body blow, as the University of California said that they would not look at any alternative “standardized test” to help it make admission decisions. No other exam “would avoid the biased results” that led the school to dump the SAT last year. The UofC system’s adoption of the SAT a half-century ago helped turn it into a “must-take” for generations of kids seeking college admission in the US. The Los Angeles Times has the story.

SIGN OF THE TIMES #2- Elon Musk is literally threatening to give JPMorgan a one-star review on Yelp as his feud with JPM boss Jamie Dimon continues. The edge lord — who said overnight that he tweets at least 50% of the time from his “porcelain throne” — made the threat in an exclusive with the Wall Street Journal.

MORNING MUST-READ- Where did all the workers go? in the Financial Times, wherein the salmon-coloured paper looks at how immigration, retirement and poor pay and working conditions are reshaping the labor market around the world. It’s the first in a series and worth keeping an eye on.

WHAT’S HAPPENING TODAY-

BOOK LAUNCH- Up and Doing, a memoir penned by Egyptian-American Enterprise Fund Chairman James Harmon (Morning Routine), will be published today. The memoir recounts Harmon’s career as a banker and discusses “how markets can move the world forward by creating stable, growing economies and sound [transactions] that promote economic development.”

The new administrative capital plays host to a Comesa summit today, while ITIDA and the Software Engineering Competence Center are hosting a webinar on fintech in Egypt.

CIRCLE YOUR CALENDAR-

The Home Appliances and Table Show (HATS Egypt) kicked off yesterday and wraps up on Wednesday. The event is organized by the Engineering Export Council of Egypt and brings together companies working in the home appliances sector.

Startup gathering RiseUp starts on Thursday and runs through Saturday.

The Cairo International Film Festival kicks off its weeklong run this coming Friday.

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: Egypt’s plans to locally assemble electric vehicles are moving forward, despite the recent breakdown in negotiations between state-owned El Nasr Automotive and China’s Dongfeng — which had previously agreed to partner to assemble Dongfeng’s E70 vehicles here in Egypt. Today, El Nasr Managing Director Hany El Kholy talks to Enterprise about why the talks fell through.

Aldar-ADQ bid for SODIC is one step closer to materializing after getting regulatory green light: The UAE’s Aldar Properties and sovereign wealth fund ADQ’s bid to acquire 90% of upmarket real estate developer SODIC is poised to move forward after the Financial Regulatory Authority (FRA) greenlit the offer yesterday, according to a statement (pdf). The market regulator’s signoff comes two months after the consortium presented its offer in September. The regulator released the statement after trading on the EGX closed yesterday.

What’s being offered: The Emirati consortium — which is 70% owned by Al Dar and 30% owned by ADQ — is looking to pay EGP 20 per share in an all-cash transaction, valuing SODIC at around EGP 7.1 bn (USD 452 mn). The final bid saw the consortium up its offer from its original EGP per share 18-19 bid in March, which would have valued the company at EGP 6.6 bn.

Some shareholders want a valuation made public: SODIC had ordered a fair value assessment back in April. If the company makes the results public, it would help “guide minority shareholders on the real value of the company,” Act Financial CEO Bassem Azab told Enterprise. 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. Sharing the fair value assessment with the rest of the market “should help shareholders make the right decision” on Aldar’s bid, Azab said.

What now? Now that the mandatory tender offer got final regulatory approval, the details of the offer should be made public within the coming days and shareholders will be given the chance to weigh in. Shareholders must agree to sell at least 51% of SODIC’s shares for the agreement to go through. Market regulations for MTOs typically give shareholders 10-30 working days to respond and Aldar has the right to adjust its offer price throughout the process.

The interest in SODIC — particularly from a regional player of Aldar’s size — should have a positive impact on the country’s real estate industry as a whole, as it signals foreign appetite for a sector that is underperforming largely because of market dynamics, Azab said. “Even if the transaction doesn’t go through for any reason, just the expression of interest that people want to buy a company in Egypt is a vote of confidence in the economy and stock market,” Azab says. There are also multiple attractive potential targets in other industries for inbound M&A, Azab says, suggesting this is the “key road going forward” to boost the EGX.

Aldar might want more of Egypt’s real estate sector: The acquisition of SODIC “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 September.

OTHER M&A NEWS-

Irish insulation manufacturer wants a piece of construction player ICON: Ireland-based insulation manufacturer Kingspan is bidding to acquire at least 65% of the Industrial Engineering Company for Construction and Development’s (ICON) sandwich panel manufacturing division, ICON said in a disclosure (pdf) to the EGX. The potential acquisition would see ICON spin off the division (which manufactures components used to insulate the exteriors of buildings) into a separate company in which Kingspan would then buy a stake. The non-binding offer will be presented to ICON’s board of directors to assess.

How much are they offering? Kingspan said it would offer the equivalent of 8.5x the unit’s 2021 EBITDA.

New tariffs mean more expensive phones: All imported mobile phones will now be subject to a 10% import tariff, according to a presidential decree published in the Official Gazette (pdf). The new tariff is double the 5% import fee originally imposed by the National Telecommunications Regulatory Authority last year and essentially applies to all phones sold in Egypt except for those assembled by local electronics outfit Sico.

Retailers will pass on the cost to consumers: Phone prices could rise 10-14% on the back of the new tariffs, the head of an industry trade body told Al Mal. Issam Badr El Din, director of the mobile traders’ syndicate, told the newspaper that there had been “confusion” between retailers and distributors following the customs hike and that the price hikes will weigh on consumer demand.

Other import fees included in the decision: Solar panels will now be subject to a 5% import tariff, according to the decree. Imports of fully manufactured marble products are also getting a 20% tariff tacked on (up from 2% previously), while tariffs on raw marble will remain unchanged at 2%, a Customs Authority source who wished to remain unnamed confirmed to Enterprise.

EDITOR’S NOTE- Corrected on 4 January, 2022

A previous version of this story incorrectly said that solar panels will be subject to a 10% import tariff

Local cement production is on course to easily outstrip demand in 2021 despite production cuts being introduced in July to ease the years-long supply glut. But Lafarge Egypt says there are signs market demand is starting to recover, with CEO Solomon Baumgartner-Aviles now projecting a 7% rise in sales this year to 48 mn tonnes,according to Al Borsa. But sales will continue to be outweighed by production, which according to Baumgartner-Aviles sits at around 82.5 mn tonnes.

Producers have been flooding the market with cement for years, with annual production surging to 85-87 mn tonnes in the past three years, far surpassing market demand. A new state-owned plant in Beni Suef only made matters worse, adding 13 mn tonnes of capacity to the market every year since its launch in 2018.

Supply cuts were introduced in July to ease the glut: In place for a year, the quotas compel market players to cut production by at least 10.7%, while additional cuts of 2.81% per production line can also be made. Industry executives have previously said that cement producers could be asked to cut production by at least 10%, as part of a proposal put forward by the Egyptian government to reduce the supply glut that is crippling the industry.

Lafarge wants to leave coal behind: The company is looking to reach an agreement with the government to start relying on natural gas instead of coal, which would allow companies to cut their emissions in half, the CEO said.

A surge in global coal prices this year has put further pressure on the margins of cement companies, most of which rely on coal to power their facilities.

A national hydrogen strategy is in the works: The government is currently contracting with a global consulting office to develop a national hydrogen strategy, Electricity Minister Mohamed Shaker told CNBC Arabia (watch, runtime: 2:57). He added that we could be seeing a hydrogen project up and running by October 2022, without disclosing the name of the company behind its implementation.

A number of big players are eyeing Egypt’s hydrogen market: Eni, General Electric and ThyssenKrupp have reportedly submitted bids worth a collective USD 2 bn to establish hydrogen plants in Egypt that would produce both green and blue forms of hydrogen.

Policymakers in Egypt have been taking green hydrogen increasingly seriously over the past 12 months, holding talks with a number of international firms about establishing a local industry that has the potential to grow into a key part of the country’s energy mix. Siemens is already on board to set up a pilot green hydrogen production plant, while Norwegian renewable energy company Scatec announced last month that it will build a 50-100 MW green hydrogen facility in Ain Sokhna, in partnership with Nassef Sawiris-backed ammonia producer Fertiglobe and the Sovereign Fund of Egypt. Eni is working with state gas company Egas to produce feasibility studies for manufacturing blue and green hydrogen.

Energy firms have been pushing hydrogen as a greener alternative to traditional fossil fuels — in what some say is a tactic meant to delay the inevitable death of carbon-emitting energy sources.

Homegrown fintech startup HollyDesk raised USD 325k in pre-seed funding in a round led by angel investor Faisal Abdel Salam, reports Hapi Journal. The company has been looking to close the six-figure USD funding round since July, and will use the money to develop the team’s technical capabilities, grow the team and its product offering, and expand elsewhere in the region.

About the company: HollyDesk provides a SaaS tool that offers companies real-time expense tracking and management of receivables and payables through a dashboard to manage their finances. Earlier this year, it teamed up with our friends at CIB to provide rapid collection of funds for employees and company-verified parties through electronic wallets.

ALSO FROM STARTUPLAND- Three Egyptian startups were chosen to join Techstars Riyadh accelerator: Tegarti, a cloud-based point of sale and retail management platform, Glamera, an app for booking beauty and health services, and Untap, an all-in-one software for planning, launching managing, and assessing online innovation and talent acquisition programs. The companies will receive an investment of USD 120k each, along with mentoring. Techstars Riyadh is run in partnership with Saudi Arabia’s CIT Ministry and Raed Ventures. The 13-week program began earlier this month and will end in February 2022.

The government’s USD 2 bn syndicated bank loan has been finalized and is awaiting approval in the House of Representatives, Finance Minister Mohamed Maait told CNBC Arabia (watch, runtime: 00:45), confirming earlier press reports of ongoing talks with 10 international banks. The facility will reportedly be divided into a USD 1 bn Islamic financing tranche and a USD 1 bn ESG tranche set to target green projects under the Finance Ministry’s green financing framework, local media said last week.

EBE receives up to USD 5 mn from EBRD to support Egyptian women-led SMEs: The Export Development Bank of Egypt (EBE) has secured a loan of up to USD 5 mn from the European Bank for Reconstruction and Development (EBRD) to on-lend to women-run SMEs in Egypt, according to the EBRD’s website. The loan aims to expand access to funding for female entrepreneurs and increase women’s participation in the economy.

The loan comes under the EBRD’s Women in Business program which provides both financial and technical assistance. The program also saw CI Capital’s microfinance arm Reefy receive EGP 80 mn in development finance last month. The Reefy initiative aims to address the financing gap for women in rural areas.

Hayah International Academy is coming to West Cairo as it looks to open its Sheikh Zayed campus Hayah West in September 2022 and will start student admissions for the 2022-23 academic year next month, according to a statement (pdf) out yesterday.

Hayah is part of the Egypt Education Fund, an education investment platform backed by GEMS, EFG Hermes, and the Sovereign Fund of Egypt. Established in 2003, Hayah is an IB school and joined the fund in June this year. EEP has several educational brands under its umbrella with two more to be launched soon. This includes GEMS International Schools, Prime National Schools and Hayah Schools. Over the summer EEP added Alexandria’s AIA International School to its portfolio and signed an MoU with Abu Soma Development (ASD) to develop and operate a school in Soma Bay under the GEMS International Schools brand.

Last night’s talk shows were all about our favorite Mediterranean city drowning: Alexandria witnessed an unprecedented amount of rain yesterday, giving us some very concerning and amusing clips of its streets overflowing with water and swallowing cars. Alexandria Governor Mohamed El Sherif said on Ala Mas’ouleety that the city’s streets are now dry and traffic has resumed (watch, runtime: 6:41).

Alexandria has given all non-essential state employees the day off and shut down schools today, not because it’s expecting more showers, but in order for the authorities to easily drain the remaining water from the streets without having the usual volumes of traffic on the roads. Kelma Akhira (watch, runtime: 2:59) and Al Hayah Al Youm (watch, runtime: 1:40) also covered the weather.

Forty-five local and international human rights organizations have called on Egyptian authorities to end what they say is the harassment of executive director and founder of the Egyptian Initiative for Personal Rights (EIPR) Hossam Bahgat, who is on trial for allegedly insulting the Elections Authority. A verdict in the case is scheduled for November 29.

Also: Amnesty, the Cairo Institute for Human Rights Studies, and Human Rights Watch criticized the UNDP’s Egypt Human Development Report for ignoring human rights issues and called for it to be reassessed in a letter (pdf) to UNDP head Achim Steiner. And an opinion piece in the Washington Post by Ezzedine C. Fishere criticizes last week’s sentencing of former member of parliament Zyad El Elaimy to five years in jail.

MEANWHILE- Egypt was named the world’s second-best scuba diving destination by Dive Travel for the third consecutive year, singling out Sharm El Sheikh, Hurghada, Dahab and Marsa Alam. Indonesia topped the list and Malaysia, Maldives and Mexico rounded out the top 5.

Also making headlines:

• Egypt’s efforts to rebuild the Gaza Strip got ink in the AFP;
• Egypt’s first wheelchair-friendly transportation company, Rahty, got attention in a short video by Reuters (watch, runtime: 1:38).
• Another day, another archaeological find: German and Egyptian archaeologists discovered remains of a temple belonging to King Nectanebo I at Matareya in Heliopolis. (Al Monitor)

The Health Ministry reported 870 new covid-19 infections yesterday, down from 884 the day before. Egypt has now disclosed a total of 351,267 confirmed cases of covid-19. The ministry also reported 58 new deaths, bringing the country’s total death toll to 19,991.

Pfizer-BioNTech vaccine effective for at least four months in 12-15 year-olds: Phase 3 trials conducted by Pfizer and BioNTech have shown that their mRNA covid jab remains 100% effective against the virus for up to four months in children aged 12-15 years-old, the companies said in a statement. The trials, which involved some 2.3k participants, didn’t reveal any serious safety concerns six months post-second dose, they said.

Gaza will start receiving USD 7-10 mn worth of Egyptian fuel paid for by Qatar under a plan to help the financially-stricken enclave pay salaries of civil servants, a Hamas official told Reuters. Under a Hamas-Qatar agreement, the fuel will be delivered to Hamas via the Egyptian border crossing, who would then sell it to petrol stations in the strip and use the money to pay the salaries of civil servants, including teachers and doctors. Qatar said last week that it had signed an agreement with Egypt to work together to provide the Gaza Strip with fuel and basic building materials, but didn’t provide details.

Sudan’s military leadership will need to do more if it is to unlock frozen US aid, US Secretary of State Antony Blinken told the country’s leaders yesterday, a day after military leader Abdel Fattah Al Burhan agreed to reinstate Abdalla Hamdok as the country’s prime minister and form a technocratic government. In separate calls to Al Burhan and Hamdok yesterday, Blinken urged them to “work rapidly to put Sudan’s democratic transition back” by releasing all political detainees and lifting the state of emergency. The US suspended USD 700 mn in aid to Sudan last month after Al Burhan led a military takeover, imprisoning Hamdok and other civilian ministers in the transitional government.

Israel and Jordan have agreed to partner in a water-for-energy agreement, Reuters reports. The agreement, the first of its kind between the two countries, was brokered by the UAE and would see Jordan build 600 MW of solar-generating capacity and export the energy to Israel. In return Tel Aviv would provide water-scarce Jordan with 200 mn cubic metres of desalinated water.

Israel is also reportedly in talks with Egypt for a similar agreement: The head of the Israeli prime minister’s office told Bloomberg last week that the two countries were having discussions about establishing Israeli solar plants in Egypt, but provided little details about what is on the table.

Also worth knowing this morning:

• Oil companies think Libya could be looking more stable as they eye USD bn investments: TotalEnergies will invest USD 2 bn in Libya’s Waha oil project, while Eni will begin working on oil, natural-gas and solar projects ahead of the country’s presidential elections. (Bloomberg)