In early 2017 Egyptian officials announced plans to offer stakes in 23 state-owned companies in a series of public offerings that would raise LE80bn ($4.5bn) over the following two and a half years. The move marked the return of the subject of privatisation on the national agenda after a decade of absence.
New Agenda
The new programme takes a more cautious approach than previous efforts at privatisation. Rather than sell-offs, only minority interests in selected state enterprises are planned to be offered to the public and investors, with the state maintaining control of its more substantial assets. The authorities are also keen to secure a fair value for their offerings to the public, mandating planning and oversight of the project to NI Capital, a wholly owned subsidiary of the National Investment Bank. Although NI Capital is privately incorporated and fully state-owned, the institution contains a wealth of private sector expertise, with a CEO who was previously vice-president and chief intelligence officer of Palm Hills Development, a real estate giant listed on both the London Stock Exchange and the Egyptian Exchange (EGX).
First Round
In July 2017 the authorities revealed the names of the first five state companies that would offer shares to investors: Alexandria Mineral Oils Company (AMOC); Eastern Company, a tobacco manufacturer; Alexandria Container and Cargo Handling; Abu Qir Fertilizers and Heliopolis Company for Housing and Development. Offerings of additional shares in state companies already listed on the EGX would form the foundation of the first round of the programme, which was scheduled to take place before the end of 2018. Later offerings would involve state companies being listed for the first time. This round would include energy contractor Enppi and state-controlled electronic payment services provider E-Finance.
In September 2018 the International Finance Corporation released a statement of support, in which its regional director, Mouayed Makhlouf, suggested that the organisation might buy into some of the government’s planned offerings, which further boosted investor sentiment. By early October the process had sufficiently advanced for the state to make public its pricing mechanism: an indicative scheme in which shares would go to the market within 10% of their average price on the EGX in the previous 30 days. By this stage, Eastern Company had been deemed the pilot project, with the government planning to offer another 4.5% of the already listed company’s shares.
Set Backs
However, by the fourth quarter of the year market conditions were beginning to look unfavourable. A cooling appetite for emerging market stocks, combined with currency crises in Turkey and Argentina, prompted some observers to question the timing of the offerings. In October 2018, a few days before the planned Eastern Company offering, the government announced that it had postponed its share sale programme until 2019, citing market volatility. In January, due to a decline in profits of around 37.13% year-on-year in the first quarter of FY 2018/19, AMOC announced a decision to further delay its listing until the firm returned to previous performance levels. The delays and rumoured potential alteration to the privatisation list remained concerns in the investment community.
Positive Signs
In March 2019 it was announced that Eastern Company had sold 95% of its shares in private sale – which was oversubscribed 1.8 times at LE17 ($0.96) per share – while the remainder were going on public offer. Although some have argued that the optimal time for the offering was missed, and the delay in the programme led to a drop in the EGX, it is a positive sign that the country’s offerings may be back on track.
In addition, in March 2019 it was reported by international media that three private companies were planning to finalise offerings before the end of the year. While one of the firms had yet to be valued at the time of the report, the combined market values of two of the companies involved totalled around LE14bn ($786.8m).
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