AM — Aldar and ADQ are the proud new owners of SODIC

Good morning, nice people, and happy almost-THURSDAY. It’s another busy news day (as it so often is at this time of year), so let’s jump right in:

WHAT’S HAPPENING TODAY-

School’s out in Alexandria, Matrouh for the second time this week: All schools across Alexandria and Matrouh will be closed today and fourth grade exams will be pushed to next week in anticipation of stormy weather forecasted by the Meteorological Authority, the two governorates announced yesterday. Alexandria University also followed suit, shutting the doors to its campus today and moving its classes online, Youm7 reported.

Alex Governor Mohamed El Sherif hit the talkshows last night to discuss the closure (watch, runtime: 10:13). The governorate closed schools on Sunday to cut down on traffic so vacuum trucks could clear flooded streets.

Expect a high today of just 19°C and heavy winds in the capital city, with the winds picking up substantially from mid-morning until late afternoon. There’s no significant chance of rain in Cairo today.

FOR TOMORROW-

Inflation figures for November will be released. Data for inflation typically appears on the 10th of every month, but is moved up one day if that falls on a Friday.

THE BIG STORY ABROAD– No single story is dominating the international press this morning. The UAE’s switch to a Saturday-Sunday weekend is getting front-page play from Bloomberg, the Financial Times is leading with the US’ threat to cut off Russia’s Nord Stream 2 pipeline if Russia invades Ukraine, and the WSJ’s top story is a look at what Amazon means to local US labour markets. Reuters, meanwhile, writes that up to 1 mn doses of covid-19 vaccines expired in Nigeria last month.

Auf wiedersehen, Angela: Germany waved goodbye to its leader of 16 years yesterday as Angela Merkel stepped down as the country’s chancellor to make way for successor Olaf Scholz, who is set to be sworn in today. Widely regarded as a steady hand at the tiller both for Germany and the EU, Merkel’s no-nonsense approach saw her become something of a figurehead for democratic stability and centrist compromise. At home, Merkel’s departure heralds a wider changing of the guard, after her Christian Democrat party suffered heavy losses in September’s national elections, leaving Scholz’s Social Democrats to govern in a three-party coalition. The story is everywhere from the AP to the BBC and the New York Times.

MEANWHILE-

FinMin goes green: The government will introduce next March a stimulus package to aid Egypt’s transition to a green economy, Vice Minister of Finance Ahmed Kouchouk is quoted as having told Al Mal. The package of measures will be announced during budget season ahead of the new fiscal year and will offer targeted financial incentives to encourage sustainable and carbon emission-reducing projects, Kouchouk said, without providing further details.

This is the latest in a string of announcements to boost the government’s green credentials before global leaders descend on Sharm El Sheikh for the COP27 climate summit, which is due to take place next November. The government is already lining up a carbon capture agreement with Eni to be announced at the summit, and has ordered construction of the country’s first green hydrogen plant to be accelerated so it can be showcased during the event. The cabinet also wants all cars and buses in Sharm and Hurghada to either be converted to run on natural gas or be swapped out for EVs by the time COP27 rolls around.

ALSO- Pre-ordering cars could become (once again) a thing in Egypt: The Consumer Protection Agency is currently working on a pre-order form to allow consumers to reserve a new car before it’s on the market. Anybody else remember the days pre-devaluation when receipts for cars that had been paid for, but not yet delivered, were nearly a form of currency?

FROM THE DEPARTMENT OF THE OBVIOUS- The shift to electric vehicles will come at a cost. The EU’s plans to ban combustion-engine vehicles by 2035 and shift towards EVs will put up to 500k jobs at risk, according to a poll of European auto suppliers. Job creation in the EV sector will partly offset this though by less than half, according to a separate study by PwC. (Financial Times)

CIRCLE YOUR CALENDAR-

The Cairo Woodshow kicks off on Thursday at the Cairo International Convention Center

Booster shot registration: The Health Ministry will begin allowing senior citizens with chronic medical conditions, as well as all medical staff, to register for a booster covid-19 vaccine as of next Sunday, 12 December.

Interest rates: The Central Bank of Egypt’s Monetary Policy Committee will hold its final meeting for the year to review interest rates on Thursday, 16 December.

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

*** 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, urban development and social infrastructure such as health and education.

In today’s issue: Two months after the Finance Ministry’s digital customs system, Nafeza, was rolled out, there doesn’t appear to be any major sources of trouble with the system, even as it is imposed on a largely digitally illiterate demographic. The system is being rolled out in phases, with an eye to have a fully-digital process by mid-next year. Today, we look at the factors to watch over the next several months to gauge how successful the system is.

The Aldar-ADQ consortium officially owns 85.5% of SODIC: The Emirati consortium of real estate giant Aldar Properties and Abu Dhabi sovereign wealth fund ADQ have acquired 85.5% of SODIC in an all-cash, EGP 6.1 bn transaction, Aldar and SODIC (pdf) said in separate statements yesterday following the conclusion of the mandatory tender offer. Aldar / ADQ paid EGP 20 per share after having originally said they would offer EGP 18-19. The offer price values the company at EGP 7.1 bn and was at an 18% premium to the volume-weighted average price of EGP 16.88 at which SODIC shares traded in the three months prior to the takeover having been announced.

SODIC’s (now former) largest shareholder is among those selling: A consortium of Act Financial, Hassan Allam Properties, and Concrete Plus Engineering offloaded their entire 15% stake in the MTO, a top executive at one of the companies confirmed to Enterprise.

The consortium had bid for up to 90% of the upmarket real estate developer and had set a floor of 51% for the transaction to go through. The consortium is 70% owned by Aldar and 30% by ADQ.

SODIC’s share price was unmoved by the news, closing down 0.2% to EGP 19.71 yesterday, while Aldar’s Abu Dhabi-listed shares closed up 1.7%.

“Aldar has identified Egypt as a priority market for international expansion, driven by a strong belief in the country’s potential and the macro-economic fundamentals driving the real estate sector. After studying the market, SODIC emerged as our desired entry-partner and is a natural commercial fit for Aldar,” Aldar CEO Talal Al Dhiyebi said.

SODIC is happy with the acquisition: “The transaction provides SODIC’s shareholders with immediate and substantial cash value reflecting the company’s solid financial position and strong brand equity,” Managing Director Magued Sherif said, adding that the consortium brings financial strength as well as a solid track record in institutional real estate investment, development of premium quality communities and destinations, and property management.

Analysts say it’s good news for the real estate sector: The acquisition is “very positive” for the sector, Beltone Research Vice President Aly Adel tells us. The existence of foreign players in the sector is an indicator that, despite the view in some quarters that there is a bubble in the market, demand is strong, he said.

The transaction has been in the works for almost nine months: Aldar Properties submitted a non-binding offer to acquire at least 51% of SODIC’s shares back in March. The consortium then presented its takeover offer in September, when it initially tabled EGP 18-19 per share, which would have valued SODIC at EGP 6.6 bn. The Financial Regulatory Authority approved the bid last month, kicking off the 10-day subscription window from 24 November.

What’s next: The transaction will be finalized in the coming days and the shares will be transferred by 16 December, Aldar said.

Advisors: CI Capital advised Aldar and ADQ. EFG Hermes advised SODIC and BDO did fair value duties.

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 [potential ventures],” it said in September.

OTHER M&A NEWS- Real estate developer Al Organi Group has acquired the Royal Grand Sharm Hotel in Sharm el Sheikh from Banque Misr according to a statement from the bank (pdf). The sale is part of the bank’s asset recycling strategy, the statement says, without providing further details on the transaction. A senior Banque Misr representative was unavailable for comment ahead of dispatch time.

Cairo Angels announces first close on USD 5 mn micro-VC fund. Angel investment group Cairo Angels reached first close on its Cairo Angels Syndicate Fund (CASF), it said in a statement (pdf) yesterday, without putting a figure on the value of the commitments it locked in for the first close. The first close was raised by individual investors, family offices and one institutional investor, who will formally join the fund in 1Q2022, the statement reads. The Delaware-incorporated fund aims to reach a second and final close at USD 5 mn by the end of May 2022 with institutional investors, CASF CEO Aly El Shalakany tells us.

CASF plans to invest USD 100-250k in 20 startups in the Middle East and Africa over two and a half years, with a focus on Egypt, the UAE, KSA, Nigeria, Kenya and South Africa, El Shalakany says. “Already now, there are more startups than we have money to invest in that are amazing,” he reveals, adding that he believes that the quality will keep getting stronger.

More may be available: The fund will enable LPs to commit additional capital on a case-by-case basis, potentially allowing the fund to write tickets of up to USD 350k per investment, El Shalakany said.

Most of the money is heading to Egypt: Two-thirds of the fund will be invested in Egypt. It is sector-agnostic and will focus on early-stage scalable startups.

Ready to deploy capital, CASF already gave a soft commitment to four startups. Sectors that are interesting for the fund are fintech, edtech, healthtech, SaaS and e-commerce.

Think of CASF as a micro-VC fund focusing on post-seed and pre-series A investments, to fill the “missing middle” of USD 100k and USD 500k. Startups wanting to scale can find themselves in a bind when seeking investments in that frame, since there are barely any investment vehicles that focus on that spectrum. The fund has the agility and mindset of an angel fund, and the discipline and speed of deployment of a VC, El Shalakany says.

The missing middle came to life because startups scale at a slower pace in “our part of the world,” he adds. Moving from seed to series A in Silicon Valley may take a year, while in our neck of the woods, it can take two to three years, El Shalakany says. Funding is critical in that period but that ticket size is a bit too much for an angel investor, while being too small for a VC outfit.

The tobacco industry is less than pleased with the latest set of conditions for a license to manufacture cigarettes, which the Industrial Development Authority (IDA) issued earlier this week, according to Masrawy. The “new” conditions booklet for the license are largely unchanged from those back in March of this year, which met with strong backlash from several tobacco players who argued that the terms of the license would create an e-cigarette monopoly and provide preferential treatment to state-owned Eastern Company. The conditions of the tender have now been redrafted three times.

What’s the same? Pretty much all of the sticking points: The new booklet, a copy of which was published by Masrawy, maintains the stipulation that the planned company will have to give Eastern a 24% stake in the new market entrant. The new license will also still authorize the distribution of e-cigarettes and “heated tobacco” products, which companies previously argued would create a monopoly and put other cigarette companies at a disadvantage. Minimum production is set for 1 bn cigarettes a year — the same figure outlined in the last booklet, but down from 15 bn in the original tender.

What’s new? The revised terms have changed up the pricing structure for the new market entrant, allowing the company to produce cigarette brands — priced within the lowest tax bracket — at Eastern’s facilities, exclusively for foreign markets. Additionally, “luxury” cigarette brands can now be priced within the range of the second-lowest tax bracket.

The minor changes continue to give Eastern an unfair advantage, Federation of Egyptian Industries’ (FEI) cigarettes division Head Ibrahim Embaby tells Masrawy. Embaby suggested that issuing the new set of terms didn’t serve anybody, save for Philip Morris, which was the only company to submit an offer in the last round and therefore didn’t need to for over EGP 114k to purchase the conditions booklet again. It is still unclear if the major tobacco players will take part or abstain like last time around.

What’s next? The IDA has set this coming Thursday as the deadline for interested companies to purchase the conditions booklet. Companies interested in bidding will be allowed to submit inquiries to the authority a week later, on 16 December. The IDA will then review offers and give its technical clearance on 23 January, ahead of the kick-off for bidding on 3 April. BAT has plans to take out the booklet before tomorrow’s deadline, a company official told us earlier this week on condition they not be named.

EDITOR’S NOTE- Corrected on 11 December 2021.

A previous version of this article suggested that the market entrant would be able to produce the same low-tax cigarettes as Eastern Company. A senior Eastern official tells us that as it stands, a new entrant would be required to bring Eastern any proposal to produce low-tax cigarettes at Eastern’s facility if the new company wishes to sell on the domestic market. Eastern would then have the right to agree to commercials terms or not.

The Sovereign Fund of Egypt (SFE) is considering issuing green bonds, fund CEO Ayman Soliman told Al Mal. Speaking during a conference in Cairo yesterday, Soliman provided little information about the fund’s plans but said that it could sell the climate-linked securities in collaboration with unidentified “partners.”

This would be SFE’s first-ever green bond issuance and would follow successful sovereign and corporate bond sales in Egypt over the past year. The government recently expressed an eagerness to start holding green bond sales more frequently.

Hold up, what are green bonds, exactly? A green bond is a type of debt issued specifically to raise money for climate and environmental projects. The World Bank was the first organization to offer green bonds in 2008 and has since issued over USD 13 bn equivalent in green bonds through more than 150 transactions in 20 currencies.

Egypt has pioneered the use of green bonds in the MENA region: The government held the region’s first sovereign green bond issuance last September, raising USD 750 mn from investors to channel into green projects. Our friends at CIB issued Egypt’s first-ever corporate green bond earlier this year, raising USD 100 mn in a five-year, fixed-rate offering.

The SFE plans to focus on scaling up investments to support climate-friendly economic growth over the next year. It is already backing several high-profile infrastructural projects, including a USD 2.5 bn plan to develop 17 new desalination plants and Egypt’s first-ever green hydrogen facility, that is currently being built in Ain Sokhna by Scatec, Orascom Construction, and Fertiglobe.

Cashback services startup WaffarX closed a multi-mn USD funding round from Silicon Valley VC firm Lobby Capital, Wamda reported, marking Lobby’s inaugural investment in the MENA region. WaffarX plans to use the funds raised to expand its platform and user base, and enter new markets in the MENA region. WaffarX has previously raised three funding rounds, with tech investor A15 leading their latest round with USD 230k, according to Crunchbase.

What does WaffarX do? The cashback aggregator, which was established in 2018, connects users with coupons, promos, and cashback rewards for its merchant partners, which include e-commerce giants Jumia, Amazon and Noon.

About Lobby Capital: The Silicon Valley VC firm was an early investor in the US cashback firm Ebates, which was sold to Japanese company Rakuten in 2014 in what was Japan’s largest e-commerce exit at the time.

Advisors: Venture by Shahid represented Lobby Capital on the investment.

ALSO FROM PLANET STARTUP- Cleantech startup Plstka has raised an undislcosed amount of capital from Alexandria Angels Network and a matching fund from Hivos, according to Wamda. The waste management gamification app, which launched this year, exchanges solid waste with rewards and coupons in food and beverage services, medical facilities and transportation for consumers. It also provides in-app competitions to help raise awareness about waste management. The startup focuses on the Delta region, with a target of acquiring 1.5k tonnes of waste.

Parents could soon face financial penalties if their children fail to attend school under legislative amendments greenlit by the cabinet during its weekly meeting yesterday. Amendments to the Education Act would see parents fined between EGP 500 and EGP 1k if their child misses a week of school without a sufficient reason, the cabinet said in a statement following the meeting.

SMART POLICY- Clampdown on child labor: The government is also looking to strengthen penalties for those found in breach of child labor rules, which prohibit employing children younger than 14. Draft amendments to the Labor Act would hand out fines of between EGP 1k and EGP 2k — double the current EGP 500 to EGP 1k fine — for every underage child a business employs. Businesses could potentially see their facilities shut down for up to six months and the fine doubled if the violation is repeated.

A push for industrial investment in Upper Egypt: The cabinet agreed to provide incentives to investors in industrial zones in Upper Egypt governorates, as part of a presidential initiative to establish 13 complexes aimed at small and medium-sized businesses. Participating businesses will be exempted from rent and maintenance fees for the first nine months, and subsequent rent payment will be cut to EGP 15.5-20.5 per meter from EGP 21-22.

Topping the talkin heads’ agendas last night: Legislative amendments the Madbouly Cabinet passed yesterday in a bid to cut down on child labor and encourage children to attend school. The story earned coverage from Al Hayah Al Youm’s Lobna Assal (watch, runtime: 1:15), and Masaa DMC’s Ramy Radwan (watch, runtime: 3:58).

The idea behind the amendments is solid, but some of the individual stipulations need to be revisited, lawyer and chair of the Egyptian Center for Women’s Right Nehad Abou El Qomsan told Kelma Akheera’s Lamees El Hadidi. The financial penalties for child labor or keeping a child out of school are extremely low, particularly when compared to the fines laid out in other laws for other crimes, such as publishing false news, Abou El Qomsan said (watch, runtime: 8:49). We have the full story in the news well, above.

Abu Qir Fertilizers’ plan to sell an additional 10-15% stake on the EGX before the month is out got some airtime on Kelma Akhira, where Emad El Din Mostafa, head of Chemical Industries Holding Company, phoned in to give Lamees El Hadidi a rundown of the company’s plans for a secondary stake sale. The company has yet to specify an exact target date and still plans to go ahead with the sale despite “less than ideal” conditions in the stock market, which Mostafa said won’t get better until fresh listings materialize (watch, runtime: 5:16).

Leading the conversation on Egypt in the foreign press this morning: A local court ordered the release of human rights advocate Patrick Zaki after almost two years in detention. The Bologna University student has been detained since February 2020 on charges relating to an article he wrote about the status of Egypt's Christians. The story is getting ink from Reuters, the Guardian, the Wall Street Journal and a number of Italian news outlets (here, here, here and here) that have followed the case closely since his arrest.

Egypt is one of 11 countries that will see looted artifacts returned after a Manhattan prosecutor ordered hedge fund manager Michael Steinhardt to return 180 antiquities worth an estimated USD 70 mn and barred him for life from acquiring other relics. The antiquities, many of which were stolen during periods of war or civil unrest, will be returned to their owners in Egypt, Greece, Iraq, Israel, Italy, Jordan, Libya, Lebanon, Syria, Turkey and Bulgaria. Bloomberg, the New York Times, AP and Reuters all have the story.

We smell the involvement of Matthew Bogdanos, the so-called Tomb Raider of the Upper East Side who created the antiquities trafficking unit in the Manhattan district attorney’s office out of sheer will (and a love of the spotlight). Go read this epic profile in the Atlantic (think: Zahi Hawass with a law degree and a soldier’s suit) — he’s been driving the New York art and antiquities scene bonkers for years.

The Trade and Industry Ministry will impose a 9% anti-dumping duty on imports of US PVC for a five-year period in a bid to protect the local industry. (Anti-dumping duties are generally imposed when a country thinks the seller is “dumping” product in a market at prices below the cost of production or in a way that unfairly threatens local industry.) Indian industrial chemical manufacturer TCI Sanmar, Egypt’s largest producer of PCV, welcomed the imposition of the anti-dumping duties. The Indian-owned company suggested in a statement (pdf) from its legal counsel, Al Tamimi & Co, that it will go ahead with its planned USD 200 mn investment in its Egyptian operations next year.

MARKET WATCH- The Central Bank of Egypt sold USD 1 bn of one-year USD-denominated treasury bills with an average yield of 2.995% in an auction yesterday, according to official figures. The offering was 1.15x oversubscribed, with investors placing bids worth USD 1.15 bn.

Hassan Allam Construction is setting up a new construction firm with Russia’s Titan-2 to handle construction work on the Dabaa nuclear power plant. The new entity should be formed by next February.

Other things we’re keeping an eye on this morning:

• Kadmar Shipping’s new line transporting agricultural crops between Alexandria and Russia will begin operating on 20 January.
• The Federation of Egyptian Industries’ readymade garments division and IFC are working on a new program together to upgrade supply chains in the textile industry.

The Health Ministry reported 889 new covid-19 infections yesterday, up from 871 the day before. Egypt has now disclosed a total of 364,922 confirmed cases of covid-19. The ministry also reported 51 new deaths, bringing the country’s total death toll to 20,821.

TRAVEL WATCH- All travelers to the US must present a negative covid-19 test taken one day before the trip, regardless of their vaccination status, the Centers for Disease Control and Prevention (CDC) announced.

A couple of international stories worth knowing this morning:

French police arrested a Saudi national at the Charles de Gaulle airport yesterday over journalist Jamal Khashoggi’s murder. A French official said that prosecutors are still confirming the suspect’s identity. (Financial Times)

The EU has proposed a new anti-coercion law that could see it retaliate with tariffs and quotas when countries (ahem: China, Russia) impose trade sanctions on member states, but some fear the wide-ranging powers could breach WTO rules and damage global trade. (Financial Times)