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Monday, 22 August 2022

Saudi wealth fund is sizing up EgyptAlum — and potentially Egyptian Media Production City + United Bank

Saudi Arabia’s sovereign wealth fund is making headlines in Cairo with at least three possible high-profile acquisitions now appearing to be in its pipeline, including an aluminum maker, a bank and Egyptian Media Production City. The fund has not confirmed any of the three potential transactions.

A stake in EgyptAlum? The Public Investment Fund (PIF) is looking to take a position in EGX-listed Egypt Aluminum’s (EgyptAlum) capital increase, Al Shorouk reported yesterday, citing unnamed sources. The newspaper says the transaction could be finalized before the end of the year. Company representatives we reached out to did not reply by our dispatch time this morning.

This is the second local outlet to report PIF interest in EgyptAlum: Al Borsa earlier this month claimed the fund could invest in EgyptAlum “within weeks.”

We’ve known for months that an Arab sovereign fund has been eying the aluminum maker: Then-public enterprises minister Hisham Tawfik said in May that the state could sell a 20-25% stake in the company to an unnamed Arab sovereign fund.

Egyptalum is staying tight-lipped: The state-owned firm didn’t confirm or deny the news, reiterating in an EGX disclosure (pdf) that it is still studying plans for a capital increase and will offer shares to a “strategic investor” to help finance its development. The state-owned company is looking to raise as much as USD 300 mn in equity and finance to upgrade its operations. It has tapped engineering giant Bechtel to conduct a feasibility study for the upgrades.

Market reax: EgyptAlum shares closed up 1.4% yesterday at EGP 17.65.

UNITED BANK TRANSACTION ISN’T DONE … YET

The PIF has not acquired United Bank, a source close to the transaction told Enterprise yesterday, denying a report in Al Shorouk that claimed that the fund has already completed due diligence and acquired United from the Central Bank of Egypt (CBE). The fund remains in early-stage negotiations with the CBE, which owns 99.9% of United, our source told us, without putting a timeframe on when PIF expects to pull the trigger on the transaction.

The Saudi sovereign wealth fund was first reported to be eyeing the bank in May. More recent reports have suggested that the PIF is close to wrapping due diligence and the acquisition could go through by the end of this year.

SOUND SMART- The CBE owns 99.9% of United Bank, which it created in 2006 through the merger of smaller entities near the end of a large-scale cleanup of the banking sector triggered by the bad-debt crisis of the late 1990s. The lending bubble of the 1990s collided with fallout from the November 1997 Luxor massacre, which sent tourism — and the economy — into a nosedive. That cleanup saw the CBE force consolidation, recapitalization, and a world-class regulatory framework (criticized in some quarters as excessively risk-averse) onto the industry. By the time it drew to an end, Egypt had 39 banks, down 17 from the height in 2003.

Advisors: Chatter in domestic media suggests PIF has appointed our friends at EFG Hermes as financial advisors and US law firm Akin Gump as legal counsel for the transaction. CI Capital is reportedly acting as United Bank’s advisor.

PIF EYEING MEDIA CITY?

Does PIF want to acquire Egyptian Media Production City? That’s according to Al Shorouk, which reported yesterday that the fund’s new Egypt investment arm is interested in snapping up 10-25% of the state-owned company’s shares, citing what it said are “informed sources.”

EMPC is none the wiser: “We have no information in regard to this news,” it said in an EGX disclosure (pdf). The company’s chairman, Abdel Fattah El Gebaly, said he had no knowledge of the news when we reached out yesterday, telling us that the company is not looking to attract investors at the moment.

Market reax: EMPC’s shares jumped 10.7% on the report, closing at EGP 5.61 yesterday.

BACKGROUND- Like our friends in Abu Dhabi, KSA is on a spending spree here in Egypt: The PIF earlier this month acquired minority stakes in four EGX-listed companies for USD 1.3 bn through its newly established arm for Egyptian investments. The buys are the first of USD 10 bn pledged by the fund earlier this year as part of Saudi efforts to support Egypt’s external position, which has been rocked by soaring commodity prices as well as outflows from our debt market and a weaker EGP. Abu Dhabi wealth fund ADQ led with similar moves, purchasing state-owned stakes in five companies for around USD 1.8 bn in April.

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