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Tuesday, 13 September 2022

Up to USD 3 bn in strategic stake sales to be announced within month -El Said

The Madbouly government will within four weeks announce the names of the state-owned companies it will offer to foreign sovereign funds in the first of a series of strategic stake sales that it expects will bring in as much as USD 6 bn, Planning Minister and Sovereign Fund of Egypt (SFE) head Hala El Said told Bloomberg Asharq (watch, runtime: 2:50) yesterday.

Up first: Look for the SFE’s newly-established pre-IPO fund to offer within a month shares worth USD 2.5-3 bn held by the National Investment Bank (NIB). The SFE will be marketing the transactions to “Arab, regional or international sovereign wealth funds,” El Said said. The minister did not give hints as to which companies might be on the list or what industries they may be in. A second phase could see stakes worth as much as USD 3 bn taken to market.

A hint at what could be up for grabs? NIB holds stakes in a large number of state-owned companies across sectors including banking, media, fertilizers, food and agriculture, building materials, real estate, and transport, according to its website. Two of the companies listed — Egyptian Media Production City and Mopco — have recently been reported in local media to be the target of Gulf wealth funds, though none of the parties involved have publicly confirmed this.

Could Banque du Caire and Misr Ins. be next? Kelma Akhira’s Lamees El Hadidi said last night that Banque du Caire could be on the sale list (watch, runtime: 2:13) in the fourth quarter. The bank is a perennial IPO prospect that has seen its financial and operational performance sharply turn around under Chairman and CEO Tarek Fayed. At least one Gulf-based lender has previously expressed serious interest in an outright acquisition. Lamees also said Misr Ins.could “maybe” be up for grabs in the fourth quarter, too.

Challenging market conditions have pushed the government to relaunch the program through the SFE’s pre-IPO fund, EGX board member Rania Yacoub told El Hadidi last night (watch, runtime: 11:06). “I believe this will be a good opportunity to take to market [government-held] stakes in state-owned companies, especially amid an interest by Arab sovereign wealth funds and investors,” she said. The fund will select strategic investors opting for stakes “carefully” to ensure they bring added value to the table, she said

Our GCC neighbors will likely be the biggest buyers: Gulf sovereign funds have been piling into Egypt after GCC countries pledged more than USD 22 bn in direct investment to help the country weather global economic headwinds. The Saudi and Abu Dhabi funds have supported the government’s pivot to strategic stake sales, snapping up holdings in EGX-listed, state-owned companies including Mopco, Abu Qir Fertilizers (which NIB reportedly made a complete exit from when it sold its stake to Abu Dhabi wealth fund ADQ), Alexandria Containers, and E-Finance.

Is Qatar next? There has recently been talk that the Qatar Investment Authority is poised to follow — and President Abdel Fattah El Sisi is in Qatar today to discuss investment (among other topics) in a landmark visit after we re-established diplomatic relations.

We knew this was coming: The SFE last week set up a pre-IPO fund to offer stakes in state-owned companies to “strategic investors and different sovereign wealth funds” ahead of listing them on the bourse. The government would then look to list the firms “when the market is ready,” El Said said at the time. The move aims to push forward the government’s privatization agenda even as unfavorable market conditions delay its IPO plans. The government was previously aiming for as many as 10 stake sales this year (including strategic sales of the kind El Said is talking about and secondary sales of more shares in already-listed companies).

Remember that USD 40 bn figure: This process is part of the Sisi administration’s strategy to raise USD 10 bn every year for the next four years by offering a range of assets to the private sector.

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