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Monday, 10 December 2018

SODIC enters EGP 800 mn settlement agreement with IGA

SODIC enters EGP 800 mn settlement agreement with IGA: Leading real estate developer SODIC has agreed to pay EGP 800 mn in a settlement with a state agency to avoid “entering into lengthy legal disputes,” the company said yesterday (pdf). The settlement avoids “significant [potential] negative implications on the Company and its stakeholders,” SODIC said, despite the fact that, in accordance with the provisions of law, the judgment and the penalties mentioned do not involve SODIC.

What’s the case? The Illicit Gains Authority (IGA) had questioned its 1995 acquisition of 1,400 feddans of land in Sheikh Zayed that has since become SODIC West. The IGA began the probe in connection with a case against former SODIC chairman Magdy Rasekh in his personal capacity. Rasekh was convicted in absentia in a 2015 verdict that was upheld a year later by the Court of Cassation, Egypt’s highest appeals court. The judgments did not involve or incriminate SODIC.

Who is Rasekh? The father-in-law of Alaa Mubarak, the son of the former president.

What does this mean for SODIC? Besides a quick hit to this year’s income statement, not much, really. The settlement is “final and comprehensive” and ensures SODIC will face no further queries on the issue. Payment of the EGP 800 mn is paced out from now through December 2020 and represents in total just 4.1% of total revenues from SODIC West. SODIC estimates that “52% of the settlement amount is to be recognized on the income statement of the financial year ended December 2018.” Strong cash flows estimated at about EGP 9.3 bn will back the payment, as will cash on hand and bank facilities.

The settlement, in the works for months now, will not have a significant impact on SODIC’s intended merger with MNHD. The all-share transaction — the first M&A of its kind in Egypt — will see SODIC acquire at least 51% of MNHD in one of the largest M&As in EGX history. MNHD’s board of directors said in a bourse filing (pdf) after a meeting yesterday that the company is still keen on the transaction with SODIC “with all the strategic and long term benefits it brings to both companies." The statement noted that the MNHD board will study the impact of these changes on the transaction’s swap ratio.

The bottom line: “The Company maintains its strong financial position and exceptionally liquid balance sheet and continues to leverage this strength to deliver to all its stakeholders while pursuing growth opportunities,” SODIC said.

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