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Thursday, 12 April 2018

SODIC, MNHD talks to begin today -source

SODIC’s board welcomes overture from MNHD; common shareholders could fast-track an agreement: Upmarket real estate developer SODIC said yesterday (pdf) that it welcomes discussions with Madinet Nasr Housing and Development about “potential strategic alternatives for the two entities by way of merger or acquisition” and specifically noted the “potential synergies and benefits that could accrue to each party” if the two businesses were to be combined.

SODIC boss sees synergies, opportunity to create value: “We’re definitely excited about an opportunity to create value for shareholders of both companies if the transaction were to go through in the appropriate way,” SODIC CEO Magued Sherif told us yesterday. “Obviously, things are preliminary, but SODIC would bring to the table an outstanding brand, deep industry expertise, a very diverse land bank, and a strong management team. And MNHD has very clear expertise and a large land bank in strategic areas on the east of Cairo. So marrying the two could makes sense provided we have the right mechanism and the right transaction dynamics to create value for all shareholders.” SODIC’s board of directors, Sherif said, will meet early next week to discuss the transaction.

Transaction could be fast-tracked by common shareholders? Although both companies have publicly (and privately) cautioned that it’s entirely possible there will be no agreement, we believe common shareholders could move the transaction toward a relatively rapid close. Olayan Financing and the Abanamay family are among the largest shareholders at SODIC, where each has board representation; they are also shareholders at MNHD. Olayan and the Abanamays are high-profile, long-term Gulf-based investors in Egypt. Both SODIC and MNHD declined to comment on overlaps in their shareholding structures, pointing us instead to public records.

15.3 mn sqm of undeveloped land in a merged company? One thing analysts will want to do is the math on the contribution of each company to a merged land bank. MNHD would bring 7.3 mn sqm of raw land to the transaction, all of it in East Cairo. SODIC has a more diverse land bank (spanning both sides of Cairo and the North Coast) and would could contribute something in the vicinity of 8 mn sqm, not the 5.8 mn sqm it reports in its land bank today: Among other transactions now in the works, the company was announced last month as the highest bidder for a 500-acre revenue-share pact with NUCA. Sherif declined to discuss those transactions yesterday, saying only, “We have a diverse and very attractive national land bank, and it is certainly growing as we work toward close on the acquisition of another 500 feddans in Sheikh Zayed.”

Want more background? You can check out MNHD’s investor presentation here (pdf) and download SODIC’s here (pdf).

A quick disclaimer: SODIC is one of three valued anchor sponsors of Enterprise whose financial support allow you to receive this briefing without charge each morning. Moreover, SODIC, MNHD and some shareholders of MNHD are friends and clients of our parent company, Inktank Communications.

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