AM — Investments + M&A in our healthcare and pharma sectors

Good morning, wonderful people, and happy THURSDAY-equivalent. We hope our Egypt-based readers get some well-earned rest on the three-day weekend after what has somehow felt like a very long week.

We’re out of office, too: EnterpriseAM and EnterprisePM will not be publishing tomorrow as we observe Police Day / Revolution Day. We’ll be back in your inbox at our customary time on Sunday, 29 January.

BUT FIRST- We have another packed issue to see you into the holiday, with tons of investment news, more recalibration of business plans post the float of the EGP, and the likely disappearance of high-yield CDs next week. All of this and more starting in this morning’s news well, below.

More progress on clearing the import backlog at ports: Imports worth more than USD 1.5 bn were cleared from our ports between 18-23 January, cabinet spokesperson Nader Saad said in a cabinet statement yesterday. Saad didn’t disclose the value of goods still to be released, though Prime Minister Moustafa Madbouly on 18 January put the figure at USD 5.3 bn, of which he said more than half (USD 3 bn) is pending documents from importers rather than hard currency to be released. Some USD 15.4 bn of goods have now been cleared in total since 1 December, per our math.

HAPPENING TODAY-

El Sisi in India: It’s the second day of President Abdel Fattah El Sisi’s three-day visit to India at the invitation of Prime Minister Narendra Modi. El Sisi will be honored as “chief guest” at celebrations to mark the country’s 74th Republic Day tomorrow.

The national handball team faces hosts Sweden in the quarter finals of the International Handball Federation’s (IHF) Men’s World Championship, tonight at 9:30pm CLT in Stockholm.

Fun fact: We’ve never beaten the Swedish side in the World Championships, having clocked up six losses and one draw. The Pharaohs almost managed to defeat the Swedes on home soil last year, missing out on victory by just a couple points, according to the IHF.

---

WATCH THIS SPACE- Are we loving Airbnb? Real estate owners could convert their properties in tourist hotspots and new cities into tourist accommodation, Prime Minister Moustafa Madbouly suggested in a meeting yesterday, according to a cabinet statement. Owners should make “best use” of their real estate assets and help maximize accommodation capacity by renting out their properties to tourists, Madbouly said, without giving details.

REMEMBER- The government is pushing the tourism sector to up accommodation capacity and improve services as part of plans to attract as many as 30 mn tourists by 2028. Look out for a new tourism strategy later this quarter for details on how those goals will be achieved.

DATA POINT: Our oil trade balance surplus came in at more than USD 3 bn in 2022, Oil Minister Tarek El Molla told Al Arabiya TV in an interview (watch, runtime: 1:58). He said the figure was preliminary and unaudited. The country is targeting petroleum exports of more than USD 18 bn this year, El Molla added.

---

THE BIG STORY ABROAD: The international press is caught up in European geopolitics this morning, as the media continues to try and figure out who is and isn’t sending tanks to Ukraine, while Finland is wondering if it can still get into NATO if it ditches Sweden at the door.

We don’t know where to look in the international business press as several stories break at once this morning:

• Mr. Murdoch has scrapped his controversial plan to reunite media giants News Corp and Fox Corp in a merger after shareholder pushback. (Reuters | FT)
• US prosecutors are gunning for Google over antitrust issues: The US Department of Justice is suing the tech behemoth in a bid to break what prosecutors characterized as a digital advertising monopoly, ramping up the pressure on Google over antitrust issues in several countries. (WSJ | Reuters | FT)
• More trouble in tech: Microsoft sales hit a six-year low in 4Q 2022, while net income fell 12% y-o-y to USD 16.4 bn. The company already said it is cutting some 10k jobs on the back of the slowdown. (WSJ)

AND- We had a feeling the Davos spirit wouldn’t last. After a surprise wave of optimism over the global economy out of the World Economic Forum in Davos last week, Bloomberg is back to burst the bubble with renewed talk of the threat of stagflation. The positive developments that helped buoy the mood in Davos — including China’s reopening and energy prices kept at bay by a warmer winter — are making stagflation “look increasingly likely,” the business newswire says. “That would be the worst-case outcome for all financial assets,” warns Nicolai Tangen, CEO of Norway’s sovereign wealth fund.

SOUND SMART- Stagflation = stagnating growth + high inflation, AKA economists’ worst nightmare. The global economy had it bad in the 1970s, and we’ve been hearing warnings that it could come back for the best part of a year. Read more in our explainer.

THE BIG SCREEN- Everything Everywhere All At Once tops Oscar noms: The sci-fi adventure hit starring Michelle Yeoh led the pack with 11 Academy Award nominations, including best picture. Fellow best picture contenders All Quiet on the Western Front and The Banshees of Inisherin followed up with nine nominations each. See the full list of nominees in every category here.

Not getting an Oscar: The snubs are more fun than the noms, in our view. Among those missing out this year are James Cameron, who will not be getting a best director award for his Avatar sequel, and Tom Cruise, whose Top Gun comeback did not gain him a best actor nomination (though both films are in the running for best picture.)

MORNING MUST WATCH- Do you love Ted Lasso? Watch this Apple advert (runtime 5:53), starring Nick Mohammed (Nate on the show). Don’t know what Ted Lasso is, but care about privacy when you’re using your phone? Watch it anyway. Then head over to Apple TV+ to catch the first season of the brilliant, light-hearted fish-out-of-water show about a Premier League football team.

COME TO OUR NEXT ENTERPRISE FORUM-

We’re excited to unveil our next C-level event: The Enterprise FDI + Exports Forum, where we will take a deep dive into two of the most critical topics affecting our community.

Exports and foreign direct investment (FDI) have never been more important to our economy — or our businesses — than in the wake of the float of the EGP. We think we have a once-in-a-lifetime chance to build an export-led economy that makes us a magnet for FDI and all the benefits that will come with it for our nation.

Subscribe to Enterprise

CIRCLE YOUR CALENDAR-

EBRD + EU + GCF green finance event next week: The European Bank for Reconstruction and Development, the EU, the Green Economic Financing Facility, and the Green Climate Fund will hold a green finance event on Tuesday, 31 January at the Nile Ritz Carlton Hotel.

OPEC+ is meeting remotely next Wednesday, 1 February and delegates are expecting the committee to keep oil output unchanged as global demand picks up, Bloomberg reports. The committee will continue to look tino the impact of Western sanctions on Russian crude and the relaxation of China’s covid restrictions on the global market, unnamed delegates told the business information service. This would mark the second consecutive meeting during which OPEC opted out of changing oil output, following a surprise 2 mn barrels-per-day cut in October. “OPEC+ looks increasingly likely to keep output levels unchanged even after the scheduled meeting … Prices have firmed, supply remains tight, and significant levels of uncertainty prevail for both supply and demand,” Eurasia Group Analyst Raad Alkadiri said.

The US Federal Reserve also meets next week, gathering on 31 January and 1 February to set interest rates. There’s growing speculation the US central bank will go for what the gang at Zooba would call a Slightly Smaller interest rate hike.

The Senate is set to reconvene on Sunday, 5 February, having yesterday completed two days of plenary sessions that saw members discuss tourism promotion and education reform.

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: Mooted delays to national projects could deepen woes in the construction industry.

SFE + B Investments to co-invest in healthcare, pharma: The Sovereign Fund of Egypt (SFE) and B Investments will together invest in Egypt’s healthcare and pharma industries under two agreements that could channel more than EGP 2 bn into local businesses, they said in a joint statement.

#1- The SFE is joining B Investments’ healthcare subsidiary: The first agreement will see the SFE invest EGP 100 mn in B Healthcare Investments, which aims to raise up to EGP 1 bn to deploy in the specialized healthcare sector. B Investments will stump up an additional 200 mn; the firm is aiming to place the rest of the fund with a mix of local and regional private-sector investors. B Investments set up the healthcare investment vehicle in 2021 (pdf, see page 16).

B Healthcare Investments’ first big acquisition was a leading fertility center: The company had “an initial focus on fertility, mother-and-child, and related services businesses,” the statement reads. It acquired last summer 51% of the Egyptian IVF Center, one of the country’s leading fertility centers, and said at the time that it was looking at follow-on investments.

#2- B investments is joining the SFE’s health and pharma sub-fund: B Investments will make an undisclosed investment in the sub-fund under the second agreement. The SFE is looking to raise an initial EGP 1.2 bn of capital for the sub-fund, with aspirations to grow bigger down the line. It will invest in local pharma players to help them expand into under-served cities around the country and improve their digital offering.

There are more investments in the pipeline: B Investments intends to invest EGP 2 bn in the healthcare and food sectors this year, with plans to acquire a healthcare company in 1Q 2023 and close a transaction in the food sector by 2Q. The private equity firm will reportedly fund the upcoming transactions with some of the proceeds of its exits from TotalEnergies Egypt and Giza Systems, which are expected to raise more than USD 150 mn combined.

Nerhadou has new minority shareholders: A private equity consortium of Affirma Capital and StonePine has closed its acquisition of a “significant minority stake” in local pharma and nutraceutical player Nerhadou International, according to a joint statement (pdf) out yesterday. The statement did not disclose the size of the stake, but said the transaction was worth USD 20 mn.

We first heard of this last year: Yesterday’s acquisition comes nearly one year after the two PE outfits first said they were investing in the company. The interest was driven by the local pharma player’s “sizable presence and dominant market share,” the firms said at the time. Nerhadou is also the first in the country to manufacture oral dispersible film (dissolvable meds, an alternative to pills), giving it a first-mover advantage.

What’s in it for Nerhadou: an IPO? “We are excited to partner with Affirma Capital and StonePine to accelerate Nerhadou’s clear growth trajectory and bring the company to IPO standards,” Nerhadou Chairman Mohsen Shalaby said. The two PE firms would help “solidify our market leadership position,” he said.

More investments planned? The play for Nerhadou is the first joint investment between the two emerging-market private equity firms in Egypt and is part of a wider joint strategy to invest in the country, the statement said. Affirma Capital and StonePine have opened a HQ in Cairo and appointed a local investment team.

StonePine already knows the market: StonePine ACE Fund — a joint venture between StonePine Capital Partners and ACE & Company, a Geneva-based global PE fund — was among the consortium of companies that acquired a 60% stake in Taaleem Management Services in 2019. It has also made an undisclosed investment in funeral services startup Sokna.

ADVISORS: White & Case was the legal advisor for Affirma Capital and StonePine. ADIB Capital, the investment banking arm of ADIB Egypt, was the lead sell advisor on behalf of Nerhadou, while Al Tamimi & Company were Nerhadou’s legal advisors.

Capricorn’s board jumps before it’s pushed: The chair, CEO, and three other directors of Capricorn Energy’s board have resigned, caving to pressure from shareholders led by activist investor Palliser Capital to overhaul the company’s management and block a proposed merger with Israeli energy firm NewMed Energy.

WHY DO WE CARE? Capricorn has a sizable portfolio of upstream assets in Egypt. The merger would have given NewMed control of those assets, paving the way for closer energy ties between Israel and Egypt boosting our ambitions to take Russia’s place as Europe’s go-to energy supplier. NewMed is a key supplier of natural gas to Egypt from its offshore fields, providing gas via the EMG pipeline to our two LNG plants on the Mediterranean coast.

The heads that rolled: Company chair Nicoletta Giadrossi and CEO Simon Thomson — who has been in the role for more than a decade — are among the five board members stepping down with immediate effect, while CFO James Smith and another director will exit before a general shareholder meeting on 1 February, according to a statement (pdf) by the board. That leaves just two of Capricorn’s nine directors still in place.

This marks a victory for activist investor Palliser: Palliser Capital — one of Capricorn’s largest shareholders with a stake of around 7% — led a charge against the company’s plans to merge with Israel’s NewMed, arguing alongside other shareholders that the proposed merger undervalues Capricorn and is “unnecessarily biased towards NewMed.” Pressure on Capricorn’s management ramped up after Palliser called for a vote to overthrow the seven board members on 1 February. Capricorn’s board looked set to fight back, scheduling a shareholders’ vote on the merger just hours before on the same day. But mounting support from shareholders for Palliser’s coup — helped along by recommendations in recent days from independent corporate advisors ISS and Glass Lewis that they reject the merger — looks to have forced Capricorn’s board into admitting defeat.

What now for the tie-up with NewMed? The move means the merger is likely dead in the water. In a statement to the Tel Aviv stock exchange, NewMed said it “estimates that the probability for the closing of the transaction has significantly decreased,” adding that it continues to examine “strategic alternatives.”

Capricorn shareholders are picky: This is the second time Capricorn shareholders oppose management's plans after scrubbing a proposed merger with Tullow Oil earlier this year.

What do the activists want instead? Take a guess. Palliser “wants much of the oil and gas group’s USD 700mn in net [capital] distributed to shareholders,” the Financial Times reports, while fellow activist shareholder Irenic is demanding the “immediate return of excess capital,” it said in a statement yesterday.

Palliser is promising a better path — especially as far as we’re concerned: “We welcome the board’s decision to step aside and enable a better path forward for Capricorn,” Palliser said in a statement. “We are confident that today’s announcement marks the first step towards governance reform and a new leadership team focused on optimizing value and delivering real growth in Egypt.”

Next steps: Shareholders will still convene on 1 February for the general meeting, where they will likely discuss new appointments to the board. Palliser has already disclosed its preferred candidates, who include Hesham Mekawi, the former Egypt and later North Africa regional president at BP, and Christopher Cox, the former CEO of Spirit Energy. The vote on the merger has been pushed to 22 February. The story also got coverage from Reuters and Bloomberg.

Banque Misr and the National Bank of Egypt are pulling their one-year, 25% certificates of deposit after the end of January, according to emailed statements from the two banks. The high-yield savings products were introduced to the market on 4 January ahead of the EGP devaluation to help curb inflation and dollarization. They offer savers a one-time 25% payout on maturity, or monthly interest payouts at a reduced 22.5% annualized rate.

More banks have issued CDs: Private lenders CIB and QNB Al Ahli each launched one-year CDs offering buyers a one-time payment of 22.5% on the maturing of their CD, or a monthly interest payout at a reduced annualized rate of 20%. While CIB’s minimum buy-in is EGP 100k, QNB offers a EGP 1k minimum. Most recently, state-owned Banque du Caire introduced its own one-year 25% CD akin to those at NBE and Banque Misr.

Expect all of the banks to pull their CDs from the market at the same time. If NBE and BM are no longer selling them, then there’s no impetus for other banks to continue doing — they introduced their CDs as defensive measures to protect deposits.

We knew this was coming: Banque Misr Chairman Mohamed El Etreby last week said the CDs at NBE and BM could be withdrawn in days — and by the end of the month at the latest.

Savers have piled in: Savers have put EGP 260 bn into NBE’s CDs, the bank said in the statement. Banque Misr didn’t disclose a figure, though it had collected EGP 120 bn as of a week ago.

The Madbouly government plans to reassess which state-owned hotels will be merged into a new hotels company ahead of an offering to foreign and Gulf investors, a source in government told Enterprise. A decision will be made on which hotels to include within 6-8 weeks, the person said, adding that the rethink was triggered by the devaluation of the EGP. The offering would be made to investors under a public-private partnership (PPP) arrangement, the source revealed.

REFRESHER- The government said last year that it would merge seven or eight state-owned hotels into a single entity to be offered up as part of the state’s privatization plans. Aswan’s Sofitel Legend Old Cataract, Cairo Marriott Hotel, Marriott Mena House, and Steigenberger Cecil Hotel Alexandria — which are all owned by the Holding Company for Tourism and Hotels (HOTAC) — were reportedly named by then-public enterprises minister Hisham Tawfik for inclusion.

Gulf funds are interested: The source declined to disclose the identities of the investors involved but said that most of the interest was coming from Gulf funds. His statements came following a report by Asharq Business that the Sovereign Fund of Egypt (SFE) is putting the finishing touches to a plan to offer a 30% stake in the new company, which it says includes seven state-owned hotels, to Gulf funds and investors during the first quarter of the year.

We know the PIF has shown interest: Last year, Tawfik disclosed that the Saudi sovereign wealth fund could acquire a 20% stake in the new company. The Public Investment Fund (PIF) was reported to be one of the most eager investors by Asharq yesterday.

This is part of the government’s privatization strategy: Global economic headwinds have pushed the government to accelerate its privatization drive. It is aiming to attract USD 40 bn of fresh foreign investment into the country over the next four years under a new strategy finalized at the end of last year.

A TREND EMERGES- We’re seeing plans to tender a number of big infrastructure, real estate and other large-scale projects pushed back as private companies and the government run their figures again in the wake of the EGP float.

Palm Hill’s Badya compound is getting a GEMS school from 2024: The Egypt Education Platform (EEP) will open a GEMS-branded British school in Palm Hills Developments’ (PHD) Badya development in West Cairo, the real estate developer said in a statement (pdf) yesterday. The GEMS British International School of Badya will be the first international school in the compound and is slated to open in September 2024. EEP is an education management firm that counts EFG Hermes and the Sovereign Fund of Egypt among its anchor investors.

The players: GEMS Education is a regional education provider with a network of more than 60 schools across MENA. EEP is the rebranded GEMS Education Egypt; it has said it has 18 schools and nurseries with a combined capacity of 21k students “at various stages of development.”

Badya is growing: The company is ramping up construction spending with a focus on Badya after reporting record-high net income in 9M 2022. New sales in Badya more than doubled y-o-y during the nine-month period, accounting for around a quarter of the company’s total new sales, according to its 3Q 2022 earnings release (pdf). PHD bills Badya as the first sustainable city in Egypt and the first smart city “in the heart of New October.”

McKinsey appointed Hasan Muzaffer (LinkedIn) its new managing partner for the Middle East, Egypt, and Pakistan, the company said on LinkedIn. Since joining the consultancy in 2004, Muzaffar has advised sovereign wealth funds, private-sector firms and conglomerates on strategy, portfolio management, and risk. He’s a member of the firm’s Global Institutional Investing & Public Finance practice.

Mopco gets a new chair, MD: The state-owned fertilizers producer has appointed Mohamed El Sayed Sobhy Mansour Amer its new chairman and managing director, according to a disclosure to the bourse. He replaces Hesham Nour El Dein, who was appointed acting chair and MD just last week following the December departure of Ibrahim Mahgoub. Mahgoub now chairs the Egyptian Petrochemicals Holding Company (ECHEM).

Indomania on the airwaves: President Abdel Fattah El Sisi’s arrival in India yesterday for a three-day visit dominated the airwaves last night, as the talking heads parsed the significance of El Sisi being the first Egyptian president to be honored as “chief guest” at celebrations to mark the country’s 74th Republic day. The visit got coverage in Masaa DMC (watch, runtime: 3:55) and Al Hayah Al Youm (watch, runtime: 2:38), with Radwan paying special attention to planned meetings between the Egyptian delegation and Indian businesses to discuss potential investments here.

We’re India’s plus-one for the G20, too: India’s recent invitation to Egypt to attend the 2023 meetings of the G20 as a guest country proves the strength of relations between the two countries, former Egyptian Assistant Foreign Minister Mohamed Abdel Hakeem told Salet El Tahreer’s Azza Moustafa (watch, runtime: 11:07),

Industrial investors get a break from the IDA: The Industrial Development Authority (IDA) granted a 6-month extension to investors who have not been able to finish construction and obtain licenses for the factories they’ve been allotted land for within the required three-year period, IDA head Mohamed Abdel Karim told Al Hayah Al Youm in a phone call (watch, runtime: 9:33.) Those who’ve already accumulated fines for missing the deadline will get a 50% cut, Abdel Karim added. The IDA recently granted more than 5.7K operating licenses to new industrial plants, he said, as part of the Trade Ministry's streamlined procedures to set up a factory in Egypt.

AND- To the African Space Agency, and beyond: The African Union and the Higher Education Ministry yesterday inked an agreement officially establishing the headquarters of the African Space Agency in Egypt, Higher Education Minister Ayman Ashour told Masaa DMC’s Radwan (watch, runtime: 2:27.) The facility is part of the Egyptian Space Agency’s 123-acre Space City, which will also include a space academy, research center, and museum.

The mummies return: The international press is taking a break this morning from all the economy talk to catch us up on the latest in ancient Egyptian finds.

Golden Boy: More than 49 gold amulets were placed inside the body of a previously unexamined mummy, researchers led by Cairo University radiology professor Sahar Saleem used cutting-edge CT scan technology to reveal. The scans show that the embalmed corpse was a teenage boy from a rich family who may not have been Egyptian. The mummy is now on display at the Egyptian Museum, The National writes. The story is everywhere in the international press, including the Times, the Independent, the Guardian, NBC, and Sky News.

When Rome is in Luxor: Egyptian archaeologists have discovered a “complete city from the Roman era” in the city of Luxor, inclusive residential buildings, pigeon towers, and workshops, General of the Supreme Council of Antiquities Mostafa Waziri said in a Tourism Ministry statement picked up by AFP.

The UK gov’t wants to keep hold of one of our artifacts: The British government is appealing to domestic buyers to purchase an ancient Egyptian limestone relief depicting women musicians, after putting a temporary bar on the artifact’s export to an unknown country. For any interested parties among our UK-based readers, the relief will set you back GBP 69.3k, plus VAT. (Statement | The National)

TOURISM-

Hilton expands its Red Sea portfolio: Hospitality giant Hilton has signed its second property in Marsa Alam: Hilton Marsa Wazar Red Sea Resort & Spa, according to a company press release (pdf). The property will be operated under the Hilton Hotels & Resorts brand in partnership with Boulevard for Tourism Development, and will feature 282 units ranging from rooms to private villas, two outdoor pools, an indoor spa pool, a spa and a gym. Hilton now operates 14 properties in Egypt — not including the new property — under the Hilton and Conrad brands, and has 11 more in the pipeline.

CLARIFICATION- 

This story was amended on 25 January, 2023 to clarify that Hilton currently operates 14 properties in Egypt. The new property in Marsa Alam does not count towards the properties it currently operates, as it has not yet opened its doors. 

CAPITAL MARKETS-

CLARIFICATION- Vodacom paid around EUR 18.71 per share to secure an additional 0.02% (49.5k shares) of Vodafone Egypt, according to figures in a bourse statement disclosing that the transaction has been executed. We previously reported that Vodacom paid a lower price of EUR 17.92 a piece, as per its original offer. It’s not clear when the price was upped. The South African subsidiary of Vodafone Group had initially sought to purchase as much as 0.05% of the company (124.6k shares) from minority shareholders in tandem with acquiring the parent company’s 55% stake in December.

EDUCATION-

Visa + Injaz Egypt partner on financial literacy program for girls: Visa is launching two new programs aimed at improving girls’ financial literacy alongside Injaz Egypt, according to a company press release (pdf). The programs will be launched in four vocational schools and aim to give girls aged 14 and above the financial skill set necessary to navigate the digital economy.

TELECOMS-

TE wants more bandwidth: Telecom Egypt has applied to the National Telecommunications Regulatory Authority (NTRA) to acquire 5 MHz of new bandwidth in the 1800-MHz frequency band, Al Borsa quotes the head of the regulator, Hossam El Gamal, as saying. The NTRA will hold an auction in the event that more than one telecom operator bids for the spectrum, he said.