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Tuesday, 15 December 2020

More military companies up for privatization in “historic shift” for the economy

Three more military-affiliated companies will open up to private ownership in 2021, Sovereign Fund of Egypt CEO Ayman Soliman told Bloomberg. The three unnamed companies join Wataniya Petroleum and the National Company for Producing and Bottling Water (Safi), which Soliman said will be open for full private ownership as early as 1Q2021. Planning Minister and SFE Chairman Hala El Said said last week that Safi and Wataniya Petroleum are the first two subsidiaries of the army’s National Service Products Organization (NSPO) that the SFE will shop to private investors as part of a wider privatization plan that will see the companies ultimately listed on the EGX.

Local and foreign investors will for the first time get a chance to own up to 100% of military-affiliated companies, Bloomberg quoted El Said as saying. She described the plan as “a historic shift in how Egypt’s economy is structured.”

The SFE could still acquire minority stakes of 20-30% in both Safi and Wattaniya Petroleum, and offer the rest to private investors, Soliman separately said in a Zoom interview with Hapi Journal.

What to watch: There have so far been few indications about the size of the stakes on offer or the timeline for pressing ahead.

Advisers: EFG Hermes will act as financial advisor on both potential sales, Soliman added.

Background: The SFE and NSPO signed last February a cooperation agreement to open up the latter’s subsidiaries for investors, after President Abdel Fattah El Sisi said twice that stakes in army-owned companies and assets could be sold on the EGX as part of the state privatization program. The fund was looking at 10 of NSPO’s subsidiaries to offer them up for co-investment as an initial phase. Soliman did not disclose the company names under assessment at the time, and the fate of the rest of the roster so far remains unclear.

ALSO FROM THE SFE- The fund and EFG Hermes expect to complete their joint acquisition of a 76% stake in the Arab Investment Bank in January 2021, Soliman told Al Arabiya. The SFE and EFG had planned to close the acquisition in 2020, but fallout from covid-19 put plans on hold. The SFE plans to acquire its up to 25% stake through its newly-established, EGP 30 bn financial services sub-fund, while EFG Hermes will take the remaining 51%.

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