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Sunday, 9 September 2018

Eastern Company to pilot government’s privatization program, EFG to manage transaction

**#3 Eastern Company to pilot government’s privatization program, EFG to manage sale: EFG Hermes was tapped to manage the first transaction in the state’s reborn privation program, which will see the sale of additional 4.5% stake in cigarette maker Eastern Company on the EGX, Finance Minister Mohamed Maait said in a statement on Thursday. State-owned investment bank NI Capital said EFG presented the best financial and technical offer for the transaction, which is expected to yield around EGP 2 bn in proceeds. Pharos Holding, Beltone, and HSBC were among the bidders.

When is the share sale taking place? The short answer: The Finance Ministry is saying one thing, the Public Enterprises Ministry another. Maait said in the statement that EFG is looking into timing of the sale, while Public Enterprises Minister Hisham Tawfik is adamant that the transaction will take place in October, according to statements he made to Masrawy. Maait had previously said that the program was on track to kick off in October.

Look for the sale to be an accelerated book build. EFG has a rock-solid track record in quickly placing stakes with quality domestic and international investors (cf: the USD 226 mn Humansoft sale this past summer). Our friend Mohamed Ebeid, co-CEO of the investment bank at EFG, told us earlier this year that this was the route the government would take: “They’ve chosen the best route, which is is an accelerated book building program for some of the government stakes in listed equities and trim down the ownership, rather than owning it through multiple vehicles. These state companies are known by investors and covered by research, which is facilitating an accelerated book-building program over a 24-hour window. That would bring a lot of volume to the market.”

Other firms on track for share sale in 4Q2018: Tawfik was also adamant that a share sale in Alexandria Container and Cargo Handling (ACCH) would take place in October, joining Eastern and Heliopolis Housing and Development. ACCH’s share sale was originally slated to take place in November. Other state-owned companies are still on track to sell more shares on the EGX in 4Q2018,according to Maait. NI Capital is reportedly set to review this week offers from investment banks looking to manage the sale of shares from the Alexandria Minerals and Oils Company, sources close to the matter told Al Mal. EFG is also in the running for the tender, alongside Pharos, HC Securities, and four other investment banks.

On a related note, Abu Qir Fertilizers, which is also in line to sell shares this year, is after an EUR 80 mn loan to upgrade its production lines, said Managing Director Saad Abou El Maaty. The company has already secured a preliminary approval for the loan from a consortium that includes the National Bank of Egypt and QNB-Egypt, he said.

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