The Sidpec-Et hydco merger could trigger an MTO: Abu Dhabi wealth fund ADQ’s acquisition of a 27% stake in state-owned Egyptian Ethylene and Derivatives Company (Ethydco) could mean that a mandatory tender offer (MTO) is triggered when Ethydco merges with EGX-listed Sidi Kerir Petrochemicals (Sidpec), A l Ma l reports, citing sources it says are in the know.

Transaction #1- ADQ is buying into Ethydco. The Abu Dhabi wealth fund will pay USD 280 mn for a 27% stake in Ethydco currently held by the state-owned National Investment Bank and GASCO, local media reported over the summer.

Transaction #2- Ethydco and Sidpec will merge. EGX-listed Sidpec’s board in July signed off on the all-share merger after approving a fair value study by financial advisor Baker Tilly. The study values Ethydco shares at EGP 2,420.09 apiece and Sidpec shares at some EGP 30.60 each. Sidpec is issuing up to 877 mn new shares in a capital increase to allocate to Ethydco shareholders under the merger.

The FRA is looking into how #1 impacts #2: The country’s financial regulator is looking into whether “future shareholders’ stakes” in Ethydco would trigger an MTO that would require ADQ to make an offer for all of the merged Sidpec-Ethydco entity, according to Al Mal’s sources. An MTO is generally triggered when a company looks to acquire 33% or more of the shares or voting rights of another company.

BACKGROUND: Ethydco was among three firms in which ADQ agreed to buy a 25-30% stake back in July, for a total USD 800 mn. The other two firms were Egyptian Linear Alkyl Benzene (Elab), and Egyptian Drilling Company (EDC). The three firms had been warehoused in the Sovereign Fund of Egypt’s pre-IPO fund. All three stake buys are expected to close by the end of this month.

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