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Sunday, 3 March 2019

In surprise move, gov’t kickstarts IPO program with a successful Eastern Tobacco secondary offering

State privatization program finally underway with an oversubscribed Eastern Tobacco offering: The private placement portion of Eastern Tobacco’s secondary offering of a 4.5% stake (equivalent to 101,250,000 shares) was 1.8x oversubscribed, with shares offered at EGP 17 apiece, the Public Enterprises Ministry said in a statement (pdf). The share price is at a 3% premium to the stock price at close on Thursday, the ministry said. Minister Hisham Tawfik had said last month that the government was considering going ahead with the sale of the company when its share price hits EGP 16.83.

Strong appetite so far: Foreign investors bought 94% of the shares offered in the private placement and the stake sale is expected to raise EGP 1.8 bn, Tawfik told Masrawy. The Holding Company for Chemical Industries announced on Thursday it would offer 95% of the shares up for grabs in a private placement and the rest in the public offering that begins today and ends on Tuesday. Reuters also had the story.

The sale is the only the beginning of the ambitious state privatization program which had an initial line up of 23 companies that are either listed already and will offer more shares for sale or brand new stocks coming to the market. The list of companies was later revised and 10 more companies were added and some were put aside. The first phase of the program, which focuses on stake sales by already-listed companies was delayed last year as the emerging markets sell-off bit the EGX. Tawfik said the government is planning for 4-5 companies to go public in the second phase of its share-sale program during 4Q2019, the domestic press reported. The program is expected to raise EGP 80 bn.

So what is coming next? The next stop for the privatization train is the sale of an additional 30% stake in Alexandria Containers & Cargo Handling, Tawfik told Masrawy, without giving details on timing. That leaves Heliopolis Housing and Abou Kir Fertilizers from the first phase, while Alexandria Mineral Oils was sidelined because of its falling profitability.

Is BdC’s IPO going to materialize soon? The government committee tasked with managing the state privatization has also apparently given Banque du Caire the greenlight to proceed with its IPO plans, sources close to the matter told the domestic press. The bank is currently reviewing its financial statements alongside other commitments to finalize logistics needed for the share-sale to take place in 2019, the sources said.

REGULATION WATCH- FRA pushes by six months a grace period for yet-to-be-traded shares: This comes as the Financial Regulatory Authority extended to 30 September a grace period for companies that have listed on the EGX but have yet to IPO, according to an executive decision (pdf). The extension from the previous deadline set for 31 March will apply to listings made before the most recent amendments. The amendments have made it mandatory for companies which have begun the process to go public to debut shares no later than one month after listing, but allowed already listed companies whose shares are yet to be traded to request an extension to no later than 31 March. Banque du Caire has been listed on the EGX since 2017, but has yet to IPO.

New regs for setting fair value: Prime Minister Moustafa Madbouly also issued a decision on Saturday stipulating that the fair share value of a holding company that is either not listed or “not active” and is looking at an IPO be determined based on its close price during the month prior to announcing the appointment of the investment bank that would manage the bookrunning, Al Mal reported.

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