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Thursday, 23 February 2023

State-owned hotels company will offer 20% to strategics — and 5% on the EGX. PLUS: Misr Life sale update

Twenty-five percent of new hotels company up for grabs: The government will offer a 20% stake in its new hotels company to strategic investors, followed by an offering of 5% on the bourse, Public Enterprises Minister Mahmoud Esmat told Asharq Business in an interview (watch, runtime: 1:20).

The government has finished transferring hotels to the new holding company, which is joint-owned by the Holding Company for Tourism and Hotels (HOTAC) and the Egyptian General Company for Tourism and Hotels (EGOTH), Esmat said. The special-purpose vehicle has an initial capital of EGP 10 mn, EGP 1 mn of which the government has paid in, he added.

Valuation TBD: The final valuation of the company will depend on the outcome of fair value studies for each of the hotels, the minister said, without confirming which hotels will be transferred to the company.

What will really matter is the mechanism: We expect the state to execute the transaction with the strategic (at least) via a capital increase, not a sale of existing shares. By having a new investor inject fresh capital, the company will have new funds to deploy as part of a growth and turnaround plan. In a sale of existing shares, the proceeds would benefit the selling parties, not the new company.

REFRESHER– The government is bundling seven of its five-star properties nationwide — including the Cairo Marriott Hotel in Zamalek and Marriott Mena House next to the pyramids complex — into one firm that will offer shares as part of the Madbouly government’s privatization program. Unnamed hotels are on the list of the 32 state-owned companies that will see stake sales over the next year. A government source told Enterprise in January that most of the interest was coming from Gulf funds. Saudi Arabia’s Public Investment Fund (PIF) has been named as one of the most eager potential investors.

Is 20% enough? Most strategic investors have strong preferences for majority stakes (to ensure they can fully consolidate the results of their new investment) with clear management control (to make sure they can drive performance improvements). Stake sizes have been a sticking point in ongoing negotiations with Qatar to sell stakes in Vodafone Egypt and two container terminal operators, with the government reportedly unwilling to meet Qatari demands for sizable ownership.


Misr Life Ins. stake sale could ahead by the end of 1H 2023: State-owned ins. company Misr Life is ready to offer stakes — barring some final technical details that advisors are working on — in a transaction that could go ahead before the end of June, Esmat told the news outlet. He didn’t disclose how much of the company will be on offer or specify whether the company would be up for listing on the EGX, to a private investor, or both.

Background: The Misr Ins. subsidiary is one of the 32 companies on the government’s privatization list for the next year. It was previously eyeing a 2H 2022 window for its IPO but was put on ice due to unfavorable market conditions.

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