Rebooted privatization program to see stakes in 32 companies sold to strategics, public investors
The reveal: The government will sell stakes in 32 state-owned companies over the next year under a rebooted privatization program designed to pull the country out of its financial crisis and secure much needed FX. In a press conference yesterday (watch, runtime: 16:22), Prime Minister Moustafa Madbouly said that the state will offer shares in the companies to strategic investors, via offerings on the EGX and a mix of both over the next 13 months.
Expect the first sales to take place in the next seven weeks: The ambitious program will begin during the current quarter and continue through to the end of 1Q 2024, Madbouly said. The government aims to complete at least 25% of the share sales within the first six months of the program, he said.
Yes, but #1: Strategic or EGX? It’s still unclear which companies are destined for the EGX and which are being earmarked for strategics. Madbouly said that the decisions on which way to go have been made by the investment banks working on the transactions, but didn’t provide any further information.
Yes, but #2: Stake sizes and valuations TBA. The PM also gave no indication of how much of the companies the government would be willing to sell to strategics. Strategics will want to acquire at least 51% of the companies if they’re going to invest. Press reports in recent weeks have suggested that the government has so far been reluctant to meet the Qatari sovereign wealth fund’s demands for substantial stakes in Vodafone Egypt and the Damietta and Port Said container terminal operators. Madbouly told Bloomberg separately that the government doesn’t have a target value for the sales.
REMEMBER- The privatization push is part of the country’s new state ownership policy which outlines how the government intends to more than double the private sector’s role in the economy to 65% and attract USD 40 bn in private investment by 2026. The government says it will reduce its involvement in a number of sectors via public share offerings, stake sales to strategic investors, and expanding public-private partnerships.
The line-up spans a wide variety of sectors including banking, oil and petrochemicals, real estate, ins. and ports.
Banking and financial services: Banque du Caire will finally go ahead with its long-awaited IPO, which has been repeatedly delayed for years due to poor market conditions. Arab African International Bank (AAIB) — whose ownership is evenly split between the Central Bank of Egypt and the Kuwaiti sovereign wealth fund — is also on the list, as is United Bank, which has been rumored to be subject to a takeover bid by the Saudi sovereign wealth fund. The privatization plan includes for the first time two ins. companies: Misr Life Ins. and Misr Ins., which were both named by the EGX in its 2022 annual report (pdf) as being in the IPO pipeline.
Oil and petrochemicals dominate the list: The Egyptian Ethylene and Derivatives Company (Ethydco), Egyptian Linear Alkyl Benzene (Elab), Helwan Fertilizers Company, the Egyptian Polypropylene and Polypropylene Company (EPP), the Egyptian Drilling Company (EDC), and Pachin are among those tapped in the list. Other industrial and manufacturing firms include Misr Concrete Development Company, Sinai Manganese Company, El Nasr Mining, and the Egyptian Ferrous Alloys Company. Plastic producer Alamal Alsharif Plastics and pharma players Chemical Industries Development Company (CID) and Misr Pharma also made it to the list.
Military firms to be sold: As expected, two military-owned firms — bottled drinks firm Safi and fuel retailer Wataniya — are included in the list. The two firms were recently added to a pre-IPO fund managed by the Sovereign Fund of Egypt (SFE), which has been restructuring the companies ahead of a share sale. Egypt has committed to reducing the military’s economic footprint under its USD 3 bn loan agreement with the IMF.
Four state-owned real estate players are in: El Nasr Housing and Development, Maadi for Development and Construction, El Mostakbal For Urban Development and Salhia Investment and Development Co, are all included, as are a number of state-owned hotels that will be merged into a single holding company ahead of a sale.
Ports: ُState-owned Port Said Container & Cargo Handling Co. (PSCCHC) and Damietta Container & Cargo Handling Co (DCHC) — which the Qatari Investment Authority is in talks to acquire — were named, as was the Suez Canal Authority’s Canal Company for Mooring and Lights.
And a lone tech firm: Misr Technology Services (MTS) will be put up for sale to investors.
That’s not all, folks: The plan will also see the state offering some of its assets, including two of the country’s largest wind farm projects: the 580-MW facility in Gabal El Zeit and the 545-MW facility in Zafarana. The Siemens-built, 4.8 GW combined-cycle power plant in Beni Suef will also be up for grabs, with the announcement coming months after it was reported to have been added to the SFE’s pre-IPO fund. The Saudi Public Investment Fund (PIF) is among those interested, waving a possibility to invest in all three plants as part of Riyadh’s USD 10 bn investment pledge, SFE head Ayman Soliman said last year.
There were a few notable absences from the list: Alexbank, eMethanex, Enppi, Assiut Oil Refining Company, and MIDOR weren’t among the 32 names announced yesterday. All of these companies were recently named (pdf) by the EGX as being in the government’s privatization plans.