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Monday, 22 October 2018

State privatization program postponed amid emerging market headwinds; gov’t remains “completely committed” to program, but could tweak lineup of participating companies

** #1 IPO WATCH- State privatization program postponed to next year, lineup of companies on offer could change: The Madbouly government has pushed the start of the state privatization program to 2019 as Egypt’s capital market is roiled by the turbulence that has swept global emerging markets in recent months. A senior government official emphasized that cabinet is “completely committed to the program,” but cannot go to market with conditions as they stand.

The program could resume as early as 1Q2019 or as late as the start of the new state fiscal year in July. It all comes down to market conditions, our source said, saying cabinet made the decision to postpone the program after consulting with investment bankers.

A new lineup could be in the offing: The state could use the delay to tweak the list of (a) already-traded companies set to sell additional shares and (b) companies set to make an initial public offering under the program.

The state had hoped to raise as much as EGP 10 bn for the treasury from the program this fiscal year and is now reviewing was to find “alternative sources” for the funds, our source says.

** #2 Eastern Tobacco IPO postponed “indefinitely,” gov’t points to messy macro backdrop: Our source spoke just one day after the government announced that its sale of a 4.5% stake in cigarette maker Eastern Company has been postponed “indefinitely” after the company’s share price plunged 11.5%, The committee overseeing the state privatization program said in a statement (pdf) that Eastern’s share performance was set against a background that includes the emerging markets sell-off, high interest rates, the introduction of protectionist measures in various economies, and the looming trade war between the US and China. Regulations for the state privatization program bar any company from proceeding with a stake sale if its shares rise or fall beyond a threshold of 10% of its average value.

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