AM — SODIC won’t revise MNHD offer unless it gets go-ahead to do due diligence

Good morning, wonderful people. Before we get underway this morning, we have an (unfortunate) programming note:

** Enterprise’s website went down late yesterday afternoon thanks to the failure of a key third-party service we use to keep our home on the web up and running. As of dispatch time this morning, the site was back up and appeared to be stable. That said, there’s the risk that service may be intermittent over the next few hours as the service restores.

** We’re deeply sorry for the inconvenience to both our readers and advertisers. You folks are the reasons we do this every day and the people who help us keep the lights and A/Cs on around this place.

PSA- No weekday holiday in observance of the 23 July Revolution: Saturday will be a national holiday in observance of the 23 July Revolution, according to a cabinet statement, with both the public and private sector taking the day off. That means the government will not be pushing the holiday to a weekday. 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.

It could well be that our next (and final) holiday of 2022 is not until Thursday, 6 October given that Islamic New Year falls this year on Saturday, 31 July. Well keep you updated as we find out, everyone.

WATCH THIS SPACE- The gov’t is prepping new measures designed to bolster the social safety net. Prime Minister Moustafa Madbouly met with ministers yesterday to discuss the implementation of emergency social protection measures announced last week to support vulnerable citizens amid surging inflation, cabinet said in a statement.

What’s on the table: The government is planning to add another 450k families to the Takaful and Karama program and raise the personal income tax exemption threshold to EGP 2.5k from EGP 2k, meaning hundreds of thousands of the working poor will not pay income taxes, Madbouly announced last week. Ministers yesterday discussed the proposed eligibility criteria for inclusion in the program, cabinet said.

THE BIG STORIES ABROAD- There are a few stories getting the global business press talking this morning:

• Netflix’s 2Q earnings, which were bad but not as bad as everyone was expecting. Cue 7% share price bounce in after-hours trading yesterday. (WSJ | CNBC | Bloomberg | FT)
• Twitter 1, Musk 0: A US judge handed Twitter an early legal victory over Elon Musk yesterday after she agreed to Twitter’s request for a speedy trial to determine the fate of the social media platform. Twitter is suing the tech bn’aire after he abruptly walked away from his USD 44 bn acquisition bid, and wants to force him to go ahead with the purchase. (FT | Reuters | Bloomberg | WSJ)

Elsewhere: Yesterday’s record temperatures in the UK is front page news everywhere (AP | Reuters | FT | WSJ | NYT), and the US broadsheets are back to covering the January 6 hearings (NYT | Washington Post)

SIGN OF THE TIMES- Cash is once again king as fund managers cut allocations to equities to the lowest level since Lehman melted down back in ‘08. We have chapter and verse in this morning’s Planet Finance, below.

(MAYBE) GOOD NEWS FOR EGYPT?- A Russia-Ukraine wheat export agreement is close: Russia and Ukraine are approaching an agreement that will see Russia lift its months-long blockade of the Black Sea ports, releasing 22 mn tons of wheat, corn and other commodities trapped on the Black Sea coast, sources familiar with the matter told the Financial Times. Moscow has said it will not target the ships, and the countries have agreed to monitor cargoes as they travel through the Black Sea. The catch: Ukraine is not yet satisfied that Russia will not attack Odessa if it agrees to demine the area — and so reportedly isn’t buying Moscow’s offer.

NOT-SO-GOOD NEWS FOR US- Ukraine’s farmers could sow up to a third less wheat and barley this season, the country’s agriculture minister has warned.

BAD NEWS FOR EUROPE- A total shut-off of Russian gas could send several European countries into severe recessions, the IMF warned yesterday. Italy, Hungary, Slovakia and the Czech Republic would face economic contractions of as much as 6% if Europe’s gas supplies were not shared while the impact on Germany and Austria would be “less severe but still significant.”

Thankfully, Gazprom appears to be deciding against hitting the kill switch: The Russian energy giant will resume gas flows through the Nord Stream 1 pipeline when it finishes maintenance tomorrow, Reuters and Bloomberg reported yesterday, citing people familiar with the matter. Fears have grown in recent days that Moscow will choose to tighten the screws on the energy-starved continent and turn off the taps when the 10-day maintenance period ends. The pipeline ships more than a third of Russian gas exports to the EU, and has been running at 40% capacity in recent weeks as Russia ramps up the tit-for-tat energy war with Europe. “They [Gazprom] will return to the levels seen before July 11,” one of the sources told Reuters.

CIRCLE YOUR CALENDAR-

The national dialogue board is set to meet again before the end of the month, marking its third meeting since the board convened earlier in July, dialogue general coordinator Diaa Rashwan said at a presser last night. The board refrained from setting a specific date for its upcoming meeting in efforts to give its members time to discuss the issues brought up. The third meeting will see the board decide on heads and members of the three political subcommittees it agreed on during yesterday’s meeting.

IDG to host cultural festival with sustainable waste in focus at Alamein: Our friends at Industrial Development Group (IDG) are hosting a cultural festival at their eco-sustainable industrial park, e2 Alamein, on the North Coast, according to a statement (pdf). The “Locale” festival, which IDG is hosting in partnership with Art d’Egypte, will include showcase nine art installations made with recycled materials to raise “awareness around waste management and

encouraging waste prevention, reuse, and recycling behavior.” The event launches this Thursday, 21 July and runs through the summer.

Calling tech startups: Universities of Canada in Egypt-based incubator DMZ Cairo has opened applications for its second eight-month incubation program for tech startups, which begins in November, according to a statement (pdf). The incubator — which is backed by the Academy of Scientific Research and Technology and the National Technological Incubators Program — is accepting applications for the cycle until 29 September.

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

In today’s issue: The MENA region is expected to see energy investments grow by some USD 879 bn between 2022 and 2026, according to a recent Apicorp report. That’s a 9% increase from the group’s projection for 2021-2025, which forecasted some USD 805 bn of investments during the five-year period.

SODIC won’t revise its MNHD offer upwards without DD or more information: Upmarket real estate developer SODIC has said it will not revise its offer price for up to 100% of Madinet Nasr Housing and Development (MNHD) without getting the green light to conduct due diligence on the company, SODIC said in a regulatory filing (pdf).

MNHD’s shares fell 3.5% yesterday on the news to close at EGP 2.77, while SODIC’s shares closed flat at EGP 11.10.

Deadlock: MNHD’s board of directors earlier this week said SODIC’s offer price of EGP 3.20-3.40 per share was too low and recommended that the general assembly reject SODIC’s request for due diligence at a shareholder meeting scheduled for 16 August. MNHD CEO Abdullah Sallam said earlier this week that MNHD believes its portfolio of undeveloped land is worth 3-4x more than what SODIC has offered for the company as a whole.

SODIC’s rationale: “The indicative non-binding offer by nature is made in the absence of full information that would allow a bidder to revisit its pricing and hence the request for access to due diligence,” SODIC Managing Director Magued Sherif told Enterprise. “There have been rumors in the market that SODIC is revisiting the price, and while SODIC — backed by its main shareholders Aldar and ADQ — is a serious long-term investor and is very keen on engaging with MNHD and its board, access to information is essential in articulating and assessing the value of any business,” he added.

By the numbers: “Our initial offer range comes at a 40-49% premium to MNHD’s three-month VWAP [volume-weighted average trading price] at the time and implies a 20.8-22.0x multiple to MNHDs earnings in the past 12 months,” Sherif explained.

SODIC’s offer had valued the cross-town company at as much as EGP 6.36 bn, while Sallam’s statements suggest MNHD sees itself worth closer to EGP 25 bn.

So what now? It’s up to MNHD’s shareholders to make a final decision on whether or not it will grant SODIC the right to do due diligence when they meet for a general assembly in August.

MNHD and SODIC have been dancing (on and off) for years: With different shareholding structures on both sides and a different management team at MNHD at the time, the two started talking about combining their businesses in early 2018. SODIC ultimately made an offer to acquire at least 51% of MNHD through a direct share swap that the two positioned as what would have been Egypt’s largest-ever M&A at the time, but alks fell through after they failed to reach an agreement on the share-swap ratio.

ADVISORS: CI Capital is acting as SODIC’s financial advisor, while MNHD has yet to tap an investment bank. Zaki Hashem & Partners is MNHD’s legal counsel.

Chimera is one step closer to acquiring Beltone: Chimera Investments’ bid to acquire up to 90% of Beltone Financial is poised to go through after getting the Financial Regulatory Authority’s (FRA) stamp of approval, the regulator said in a disclosure to the EGX (pdf) yesterday.

Refresher: Chimera filed in June for regulatory approval to take over Beltone, saying it intended to seek up to 417.1 mn shares in the financial services company at EGP 1.485 apiece back in June. The offer would value Beltone at around EGP 690 mn.

Beltone’s shares have soared by nearly 50% since it was first reported last month to be in play, and rose another 0.7% yesterday to close at EGP 1.55.

The current owners: Orascom Financial Holding (OFH) controls about 58% of Beltone, with the rest in freefloat. OFH has been trimming its stake in Beltone over the past couple of years, having held as much as 74.5% of the company in 2020.

Bachtler: “All options open.” OFH began discussing the offer after it received FRA approval and hopes to come to a decision in the coming days, CEO Nils Bachtler told Enterprise. It’s not yet clear how big of a stake OFH could offer up, but Bachtler said that “all options are open” and that the decision will be made once the board concludes its discussions.

What now? With the mandatory tender offer approved by the regulatory, the details 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 Beltone’s shares for the acquisition to go through. Market regulations for MTOs typically give shareholders 10-30 working days to respond and Chimera has the right to adjust its offer price throughout the process.

Advisors: Chimera has tapped Matouk Bassiouny & Hennawy as legal counsel to the Abu Dhabi-based fund.

Bye, Alexandria: Cairo-born mass transport app Swvl has suspended all its routes within the city of Alexandria as part of ongoing efforts to cut costs, Swvl CFO Youssef Salem confirmed to Enterprise. The company announced in May a raft of measures to reduce overheads in a bid to turn cashflow-positive in 2023, including slashing a third of its workforce, imposing cuts on executive pay, and scrapping unprofitable routes.

You can still use Swvl to get to — and in some cases around — Alex: Intercity routes between Cairo and Alexandria will continue, Salem said — and you can use those routes to get around in Alex, Salem said. “On a Cairo-Alexandria route, there will be multiple stops inside Alexandria and you can book any segment on the trip from any stop to another,” he explained. Swvl will also still run its B2B service for private companies in the city, he said.

Swvl could resume its Alex service next year “once we turn profitable,” Salem said, adding that the Cairo intracity service has been more profitable for the app than that in Alexandria.

Your Sahel vacation is not canceled: Swvl’s decision will not impact routes to and from Sahel, Salem said. “Cairo-Sahel routes are separate as they take the Wadi Al Natroun route [so] they don't go to Alexandria,” he said.

There will be no further job cuts on the back of the move: All of Swvl’s intracity Alexandria drivers will be moved to intercity B2C, and B2B routes, Salem said.

The company is not planning to make any further cuts to routes in Egypt, he said. Cairo is now the only city in which Swvl operates intracity routes, while the company continues to operate intercity B2B and B2C trips in all other governorates, he added.

Swvl is trying to become a leaner machine amid tough times for tech startups. The app’s shares have plunged by over 75% since it debuted on Nasdaq in April, as tech stocks bear the brunt of rising risk-off sentiment in global markets. The company is now trying to focus on its most profitable transport-as-a-service (TaaS) and software-as-a-service (SaaS) streams in its relatively higher-earning markets.

But there’s no rest for acquisitions: The news comes days after Swvl announced its fourth acquisition of the year. The company bought Mexico-based transport firm Urbvan Mobility in a share-swap agreement, giving it access to the second most populated country in Latin America. The company has continued to pursue global expansion through acquisitions of competitors in Spain, Chile and Argentina, Turkey, Germany, and the UK.

Toyota exits Egyptian Offshore Drilling Company: Toyota has sold its 50% stake in the Egyptian Offshore Drilling Company ahead of the company’s liquidation. Majority shareholder the Egyptian Natural Gas Holding Company (EGAS) bought the Japanese company’s 280k shares for EGP 660.2 mn yesterday, Shawkat Elmaraghy, managing director of transaction broker Prime Securities, told Al Borsa. This values the company at around EGP 1.3 bn.

What’s next: EGAS and South Valley Egyptian Petroleum Holding Company (Ganope) will now likely divide the assets between them. The board will hold an extraordinary general assembly tomorrow to approve Toyota’s exit and split the company’s assets between the two remaining shareholders, EGAS and Ganope, Al Dostor writes, citing anonymous sources in the oil sector.

Correction: 1 August 2022

A previous version of this article reproduced an inaccurate figure from Al Borsa. Toyota has sold its 50% stake in the Egyptian Offshore Drilling Company, rather than 30% as claimed in the article.

The AfDb is giving us USD 271 mn for food security: The African Development Bank (AfDB) given Egypt a USD 271 mn loan to boost food security and resilience this fiscal year in the wake of supply shocks brought on by the Russia-Ukraine conflict, AfDB said in a statement.

The breakdown: Some USD 174 mn of the funding is coming from the AfDB’s newly launched program to shore up African food security in the aftermath of war in Ukraine. The remainder will be funded by its multi-donor standalone support directed to Egypt from the bank and unnamed co-financiers.

There could be a whole lot more where that came from — for a total of more than USD 1 bn: The World Bank and the Asian Infrastructure Investment Bank could each chip in another USD 400 mn to the pot under the program, according to the AfDB document. The amount that the co-financiers would contribute is still subject to final negotiations, AfDB said.

Where the money’s going: The loan “will contribute to strengthening food security and resilience of the Egyptian economy, with particular emphasis on increasing national agricultural productivity, mitigating food security risks, and enhancing private sector and fiscal resilience,” according to the AfDB.

Including incentives for farmers + fertilizer producers: The program will support government moves to hike the price at which it buys wheat from local farmers to EGP 3.8k per ton, up 15% on last fiscal year, as well as other farming incentives, the AfDB document reads. It will also help support 30-50% tax breaks for green hydrogen and ammonia producers to increase fertilizer production, and a three-month freeze on the price of bread implemented by the government. The funding will also go toward strengthening private-sector food players and fiscal resilience.

REMEMBER- The World Bank has already pledged USD 400 mn to help fund state wheat purchases after prices spiraled on the world grain markets following the loss of key Ukrainian supply. Before the war, we sourced north of 80% of our wheat from Russia and Ukraine. France has also pledged EUR 100 mn to Egypt on food security and the Biden administration has pledged USD 50 mn earmarked for the same purpose as part of a bigger USD 1 bn initiative to shore up food security in this part of the world.

The General Authority For Supply Commodities (GASC) canceled its latest wheat tender yesterday, due to higher-than-expected prices, it said in a statement. The authority was seeking wheat from the US, Canada, Australia, Argentina or Brazil for delivery between September and November but faced paying at least USD 443 per ton after it only received offers from the US, traders said. French and Russian wheat were also offered but were rejected.

GASC isn’t giving up: Traders said that the state grain buyer is inviting new offers today. This time it is accepting offers from all 17 import origins accredited by the state buyer. Suppliers will submit bids on a cost and freight basis (CFR) for shipment between September and November.

The national dialogue board’s second meeting dominated the airwaves last night: The board discussed the dialogue’s political agenda and decided to form three subcommittees focused on political rights and elections, local councils, and human rights, dialogue general coordinator Diaa Rashwan said at a presser (watch, runtime: 58:21). The board will convene for a third meeting before the end of the month. The news received coverage from Masaa DMC (watch, runtime: 3:37), Ala Mas'ouleety (watch, runtime: 2:51) and Al Hayah Al Youm, which hosted board member Emad El Din Hussein (watch, runtime: 3:20).

Auf Wiedersehen Germany, zdravo Serbia: President Abdel Fattah El Sisi wrapped up his visit to Berlin yesterday and headed to Serbia for talks with Serbian President Aleksandar Vučić. El Sisi’s last few hours in Germany included a meeting with the German Foreign Minister Annalena Baerbock, which saw the two discuss bilateral relations and climate change, Al Hayah Al Youm (watch, runtime: 1:50 | 0:57) reported. Salat El Tahrir interviewed former assistant foreign minister Hussein Haridy on the significance of El Sisi’s time in Berlin (watch: runtime: 7:56). Masaa DMC (watch, runtime: 6:56) also covered the story.

Also on the airwaves last night:

• We’ve entered the sixth wave of covid-19, and although it’s less severe this time around, we should still be careful, presidential health advisor Mohamed Awad Tag Eldin said. (watch, runtime: 8:13)
• The Consumer Protection Authority is cracking down on bakeries skimping on the weight of a loaf of baladi bread, authority head Ayman Hossam El Din said. (watch, runtime: 5:26)

Yesterday’s deadly bus crash is leading the conversation on Egypt in the foreign press this morning: A passenger bus collided with a truck in Minya yesterday, leaving 23 dead and 30 injured. Separately, 16 others were injured after a truck overturned on the western desert road in Upper Egypt. The Associated Press, the National, and CBS News all covered the news.

A US executive order just signed by Biden could have implications for Egypt: US President Joe Biden yesterday signed an executive order that allows federal agencies to impose sanctions on foreign governments that arbitrarily detain US citizens, Reuters and the Washington Post report. It will also introduce new travel warnings for countries the administration says carry higher risks of wrongful detention, which will be applied immediately to Venezuela, China, Iran, Russia and North Korea. There’s no indication that Egypt is in line for sanctions, but both stories cite our pre-trial detention practices.

Speaking of prisons: The Economist asks how the Egyptian judicial system designates terrorists as terrorists.

MEANWHILE- Developments in our tourism and antiquities sector are the subject of this photo essay in the WSJ Magazine.

Bahraini fintech comes to Egypt: Bahrain-based payment solutions provider Arab Financial Services (AFS) plans to expand to Egypt, the company said in a statement. The decision to set up an Egypt hub was driven by “the unprecedented growth in the Egyptian market over the past few years,” said CEO Samer Soliman. The company has appointed former JumiaPay Egypt managing director Tawfik Mahmoud (LinkedIn) to head its Egypt operations. AFS is a subsidiary of Bank ABC.

Also this morning: Abu Dhabi Islamic Bank Egypt (ADIB Egypt) has approved an EGP 1 bn capital increase.

Climate change negotiations need not be a “zero-sum game” between developing and developed countries, Foreign Minister Sameh Shoukry said yesterday, calling on governments to compromise at the upcoming COP27 summit in November. The current heatwave in Europe is “a testament to the necessity of all of us moving together,” Shoukry said during a press conference with German Foreign Minister Annalena Baerbock on the sidelines of the Petersberg Climate Dialogue in Berlin (watch, runtime: 23:04).

Key COP27 talking points: Shoukry touched on the government’s key themes ahead of the summit in Sharm El Sheikh of loss and damage, support to climate-vulnerable communities, and the climate finance gap. Shoukry also held talks with US climate envoy John Kerry in Berlin, the Foreign Ministry said in a statement.

El Sisi also met with the German foreign minister: The president discussed with Baerbock the crisis in Ukraine and its repercussions on the global economy, as well as climate change, a statement by Ittihadiya read.

El Sisi is now in Serbia: El Sisi was greeted by his Serbian counterpart Aleksandar Vučić after flying yesterday from Berlin to the Serbian capital of Belgrade, Ittihadiya said. The pair are set to discuss strengthening political and economic ties.

Egypt wants Africa to have a seat at the G20: Egypt is one of several African nations calling for the African Union to be represented at the G20, Bloomberg reports. “Having Africa as a member through the African Union, will strengthen the G-20,” a letter signed by the finance ministers of Egypt, Ghana and Senegal seen by the business newswire.