TONIGHT: Oil rises ahead of OPEC+ meeting; Pandora Papers leaks lead foreign press coverage; Brinksmanship on Capitol Hill; Sense scientists win Nobel Prize.
Good afternoon, everyone, and welcome to a crazy-busy news day, with plenty of investment, M&A and taxation news. There’s a lot, so let’s jump right in:
THE BIG STORY OF THE DAY: We’re getting another 6.4 mn doses of mRNA vaccines against covid-19 this month thanks to our friends in the United States. The 1.6 mn doses of the Pfizer / BioNTech covid-19 vaccine we received last week as a gift from the US was the first of a total of 8 mn doses of mRNA vaccines inbound from the United States. Health Minister Hala Zayed and American Ambassador to Egypt Jonathan Cohen made the announcement at a joint presser today. The US will be sending the shipments of both Pfizer and Moderna’s jabs our way this month. Cohen and Zayed both said the donation underscores the strong, decades-long partnership between the two countries.
THE OTHER BIG STORIES OF THE DAY so far-
#1– DPI’s USD 900 mn PE fund is the biggest ever in Africa: Including an additional USD 250 mn in dedicated co-investment capital, the Africa-focused private equity firm’s third fund is set to hit a final close with USD 1.15 bn to invest across the continent. Some of that capital has already been deployed in Egypt as part of fintech player MNT-Halan’s record-breaking USD 120 mn round and the acquisition of pharma firm Adwia. The success of DPI’s existing Egyptian investments was among the keys to fundraising in the latest round, a senior exec at the fund told Enterprise.
#2- EFG announces Ignis Energia investment: EFG Hermes’ energy investment platform Vortex Energy has acquired an undisclosed stake in Spanish solar firm Ignis Energia for EUR 625 mn, it announced in a statement (pdf) this morning.
#3- Capital gains tax won’t affect privatization program -Tawfik: The state privatization program won’t be delayed by the introduction of the 10% capital gains tax on EGX transactions in January, Public Enterprise Minister Hisham Tawfik told CNBC Arabia. Tawfik downplayed concerns held by many in the finance industry that the tax could impact trading volumes and derail the EGX’s recovery, suggesting that new listings will bolster the EGX’s performance and boost trading.
#4- Is the state stepping up regulatory scrutiny of healthcare M&A? The government has set up a committee consisting of officials from a number of ministries, the EGX, the Financial Regulatory Authority, the Egyptian Competition Authority and GAFI to regulate merger and acquisition activity in the nation’s red-hot healthcare industry, Al Mal reports, citing unnamed sources. The body will reportedly decide the requirements for investment in the sector and will have the authority to approve acquisition bids.
^^ We’ll have the full rundown on all of these stories and more in tomorrow's edition of EnterpriseAM.
Oil hits new three-year high as OPEC+ meets: Oil prices are hitting highs not seen since September 2018 this afternoon as the OPEC+ alliance of oil producers meets to discuss whether to further increase production amid fears of a global energy crisis. Having held steady for much of the day, the price of Brent crude rose 1.7% to USD 80.6 per barrel at the time of dispatch, though there remained no news coming out of the meeting. Three sources told Reuters earlier that the cartel will likely maintain the current agreement to add another 400k barrels per day to the market in November, rather than increase output as some reports have suggested.
** CATCH UP QUICK on the top stories from today’s EnterpriseAM:
- A USD 500 mn sovereign sukuk issuance in the works? This is according to Finance Minister Mohamed Maait, who suggested yesterday that the issuance would be “similar in size” to Egypt’s first sovereign green bond issuance last year.
- Auto sales up again: Passenger car sales continued to strengthen in August, rising 15% y-o-y during the month.
- Telecom Egypt to return to the debt markets: The state-owned company is looking to borrow USD 500 mn from a syndicate of international banks.
THE BIG STORY ABROAD-
Everyone’s talking about the Pandora Papers this afternoon: the first wave of headlines to emerge from the massive data dump concerns the secret assets and offshore tax wranglings of global political leaders — but expect much more to come. Over 600 journalists from 150 media outlets spent 18 months combing through the leak’s 11.9 mn files, according to the Guardian, and will be publishing what they found out about the dealings of more than 100 global b’naires, among others, in the coming days. World leaders including Vladimir Putin, Jordan’s King Abdullah, Imran Khan and Boris Johnson have been responding to allegations of nefarious tax dealings arising from the leak.
The global financial press is, so far, giving this story a pass: AP | Reuters | Washington Post | BBC | Miami Herald — they all have (prominent) wall-to-wall coverage. The Financial Times and Wall Street Journal? Not so much.
As you read, do so with a discerning eye: Sometimes, offshore structures are tax dodges. Or criminal attempts to launder money or keep assets out of the reach of a partner, former spouse or court. Oftentimes, though, they’re just the price of doing business in an emerging market. Just about every single USD of capital that’s been committed to an Egyptian startup, for example, by a global venture capital outfit has gone through an offshore structure. Same with any just about money invested here by an international private equity firm.
Why? For starters, because foreign investors have confidence in the courts of countries such as Mauritius and The Netherlands — which also happen to allow full enforcement of shareholder agreements as written. Easy avoidance of double taxation (not avoidance of taxation) and the easy movement of capital, and enforceability of agreements on share transfer and weighted voting rights are among the many other considerations that make special purpose vehicles (and the like) attractive.
US lawmakers are sitting on their hands as the country edges towards default: There remain few signs of compromise between Democrats and Republicans over raising the US debt ceiling, moving the country closer to a potential debt default later this month, writes Bloomberg. The Senate will vote on a measure passed by the House to suspend the federal government’s debt limit until December 2022, but the Republican Senate minority leader Mitch McConnell is set on blocking the attempt for a third time.
The US has until around 18 October before they really run into trouble, according to Treasury Department Secretary Janet Yellen, who said that this is the date at which the Treasury will be unable to meet its financial obligations unless the debt ceiling is lifted. Others have said that Washington may be able to last another week or two.
Few people genuinely think that Congress is crazy enough to drive the country into default (though with Mitch McConnell leading negotiations, anything is possible): “The worry has already begun, to be quite honest,” said one US strategist. “I think the market would get very worried” if Congress hasn’t charted a legislative path forward by the end of this week, he added.
Sense scientists awarded Nobel Prize: American scientists David Julius and Ardem Patapoutian have been awarded the Nobel Prize for Medicine for their work on how nervous system receptors allow us to perceive heat and touch, according to a press release (pdf). The two scientists’ independent discoveries are being used to develop treatments for chronic pain, including new types of painkillers. The two 2021 Nobel laureates will split the USD 1.15 mn prize.
MEANWHILE- A massive restructuring looks increasingly likely for China’s teetering property giant Evergrande, whose debt crisis caused global markets to sink for a time in September and threatened to cause a meltdown in the Chinese property market. Chinese English-language daily Global Times reported this morning that the company will raise more than USD 5 bn by offloading a majority stake in its property management arm, part of a huge restructuring effort to unwind the USD 305 bn debt mountain accumulated by the company. First in line to be made whole in the restructuring are construction workers and homebuyers, one Chinese fund manager told Bloomberg. Foreign bondholders are on their own: “It’s highly likely that Evergrande’s offshore bondholders will be wiped out,” he said.
🗓 CIRCLE YOUR CALENDAR-
PSA- It’s official: You have a short workweek. The nation will take Thursday, 7 October off in observance of Armed Forces Day, the cabinet said yesterday in a statement. We can also expect to have a Thursday off later in the month thanks to the Prophet Muhammad’s Birthday, which is formally observed on Monday, 18 October.
☀️ TOMORROW’S WEATHER- The midweek tomorrow seems to be the chilliest day of the week with the mercury maxing out at 31°C and dropping to 19°C at night, our favorite weather app tells us.