Get ready for the details on 20 companies in the privatization pipeline: The government will next week reveal the names of at least 20 state-owned companies in which it plans to offer stake sales over the next year, Prime Minister Moustafa Madbouly said at a press conference yesterday (watch, runtime: 15:05 or read the cabinet statement.) The state offering program will include both stake sales to strategic investors and listings on the EGX, he reiterated.

A rough timeline: Some companies will be sold within the next two to three months, some will take five months, and others will wait until the end of the year, Madbouly said. He emphasized that all the companies named next week are set to be offered within the yearlong timeframe. Other details – including the percentages that will be offered in each company — will be disclosed on a case-by-case basis depending on where each sale stands in the planning process, he added.

Some potential candidates: The Sovereign Fund of Egypt’s pre-IPO fund wants to raise as much as USD 6 bn through strategic stake sales, with names including bottled drinks firm Safi and fuel retailer Wataniya reportedly already included, alongside Banque du Caire (BdC), Misr Life Ins., and Egyptian Linear Alkyl Benzene (Elab). Those last three were all named as being ready to list by the EGX in its 2022 annual report (pdf), in addition to the Egyptian Drilling Company. The bourse also listed Enppi, Midor, Assiut Oil Refining Company, eMethanex, Ethydco, El Wady for Phosphate Industries and Fertilizers, Misr Ins, and Alexbank as candidates.

This is as ambitious as we’ve seen gov’t be on privatization plans: The state has long been eyeing offerings for a number of its majority-owned companies, and last year planned to sell shares in as many as 10 state-owned companies on the bourse, either via IPOs or secondary stake sales. Those plans were derailed after the war in Ukraine triggered turmoil in the financial markets. The government now appears to be building back bigger, with Madbouly noting that all the sales planned for this year will be primary offerings, either to strategics, on the EGX, or both.

Why the optimism? Market conditions are now much improved: The benchmark EGX30 is up 12.4% YTD, racking up its best performance in years on the back of the October devaluation of the EGP. Our USD 3 bn loan agreement with the IMF — which includes a pledge to up private sector participation in the economy — and the push to bring in more FDI amid an FX crunch are also lending momentum to the government’s privatization plans.

Some insight on the strategy when it comes to public and strategic sales: Strategic stake sales and offerings on the EGX have complementary goals: upping the involvement of both individuals and the private sector in the management, development, and ownership of state-owned entities, Madbouly said. He noted that strategic investors come on board to expand businesses and increase their capital — creating jobs in the process — and pointed out that the bulk of gains made by foreign investors here is reinvested in the country. “The foreign investor is interested in the success of the entity in which he invests, and looks forward to its growth,” Madbouly said.

Don’t expect a flurry of IPOs: As some of the talk shows have pointed out in recent days, IPOs take time — and with Ramadan coming up fast, we shouldn’t expect to see new listings on the EGX in the immediate future. Indications thus far have been that strategic stake sales will likely precede IPOs of state-owned companies on the bourse.

That’s no bad thing: With no IPOs now in the market, cabinet should have a bias toward stake sales to strategics, retaining modest stakes that they could monetize in a later IPO after the new strategic partner improves corporate and financial performance at the asset. There will be a post-Ramadan window lasting until early June in which to go to market with IPOs before the summer slowdown. The next window would then be in September.

REMEMBER- The state is looking to reduce its involvement in certain sectors of the economy as part of its recently unveiled state ownership policy, which aims to more than double the private sector’s role in the economy to 65% and attract USD 40 bn in private investment by 2026. Public share offerings and stake sales to strategic investors will be a key part of seeing that policy through.