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Thursday, 11 August 2022

The Saudis have arrived

The Saudi sovereign wealth fund acquired minority stakes in four EGX-listed companies for USD 1.3 bn yesterday, the Planning Ministry said in a statement. The Saudi Egyptian Investment Company (SEIC), the newly-established Egypt investment arm of the Public Investment Fund, purchased shares in Misr Fertilizers Production Company (Mopco), Abu Qir Fertilizers, Alexandria Container and Cargo Handling, and E-Finance, according to the statement.

The breakdown: Market data yesterday showed that the SEIC bought stakes in:

  • Mopco: A 25% stake was sold for EGP 7.15 bn, at an average price of EGP 123.96.
  • Abu Qir: A 19.82% stake was sold for EGP 7.3 bn, at an average price of EGP 29.08.
  • e-Finance: A 25% stake was sold for EGP 7.5 bn, at an average price of EGP 16.23.
  • Alex Containers: A 20% stake was sold for EGP 3 bn, at an average price of EGP 10.14.

The sellers: Informed sources told Al Mal that SEIC purchased the e-Finance shares from the National Investment Bank (NIB) and the Abu Qir stake from Al Ahly Capital Holding (the investment arm of state-owned National Bank of Egypt) and the Industrial Development Authority. The Holding Company for Maritime and Land Transport sold a 20% stake in Alex Containers, while Mopco saw NIB, Gasco and others selling, they added. The Finance Ministry and Misr Life were reported to be among the selling shareholders on Tuesday.

There’s more where that came from: The investments are the first of USD 10 bn pledged by the PIF earlier this year as part of Saudi efforts to support Egypt’s external position, which has been rocked by soaring commodity prices. The fund is looking to invest in the infrastructure, real estate, healthcare, financial services, food and agriculture, manufacturing and pharma sectors, and was reported this week to be closing in on the acquisition of United Bank.

Any of this sound familiar? Ths Saudi wealth fund isn’t the first this year to make a major round of purchases in publicly-traded firms. Abu Dhabi wealth fund ADQ purchased state-owned stakes in five companies for around USD 1.8 bn in April.

The Saudis have now bought into some of the same state-owned names as ADQ, which snapped up a 20% stake in Mopco, 21.5% of Abu Qir, and 32% of Alex Containers. ADQ also bought shares in CIB (17.5%) and Fawry (11.8%).

Shares were mixed over the news: Alex Containers rose 7.2% to EGP 10.1, while Abu Qir closed in green at 1.4% to EGP 24.2. Both e-Finance and Mopco ended in red, down 3.6% to EGP 15.5 and 0.4% to EGP 106, respectively.

What they said: The “transaction comes under the state’s plan to expand the ownership base and promote foreign direct investment,” Planning Minister Hala El Said said in the ministry statement. “It reflects foreign investors’ confidence in the Egyptian economy as one of the most promising strategic markets,” she said. “The acquisitions are in line with SEIC’s objective to invest in promising sectors,” the PIF-owned company said in a press release.

Privatization plans: All of this is part of the government's plans to attract USD 10 bn of investments a year over the next four years as it looks to open up more of the economy to the private sector.

Advisors: Our friends at EFG Hermes executed the transaction on the EGX for SEIC while Pharos Holding executed the transaction on behalf of the state-affiliated sellers, Al Mal reports citing anonymous sources. Matouk Bassiouny & Hennawy was legal advisor to the SEIC, while Baker McKenzie was advisor to the state entities, Al Mal reported.

There’s more to come from the KSA and its neighbors: Several Saudi companies in June signed agreements that will see them invest USD 7.7 bn in Egypt, with the KSA at the time saying it intends to “lead” USD 30 bn in investments here. Gulf state neighbors have pledged more than USD 22 bn in total to support the economy amid the fallout from the crisis in Ukraine.

The news is getting attention in the global press: Bloomberg | Reuters.

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