That’s a wrap on historic hotels sale: Talaat Moustafa Group (TMG) now officially owns a 39% stake in a group of historic hotels, Prime Minister Moustafa Madbouly said during a presser (watch, runtime: 23:45). That wraps a transaction that has been months in the making.

In detail: TMG inked the final agreement with the Sovereign Fund of Egypt (SFE) and the Egyptian General Company for Tourism and Hotels (EGOTH), giving its subsidiary Icon Investments 39% ownership and full management rights of a group of seven historic hotels — branded under the umbrella of Legacy Hotels.

TMG will become majority owner: The agreement will eventually see TMG's Icon hold a 51% stake in the hotels, bringing the transaction’s value to USD 800 mn, to be financed through Icon’s internal resources and an upcoming capital increase, TMG said in a statement (pdf). An “international strategic investor” will acquire a USD 882.5 mn minority stake in Icon via a capital increase, giving it an indirect stake in the hotels. This will result in “one of the largest foreign direct inflows into Egypt in the last several years.”

Sound smart #1: SFE CEO Ayman Soliman has long advocated that buyers be given the right to up their stakes through the injection of fresh capital that gives companies the cash they need to grow.

What’s in the portfolio? Seven historic properties, including the Cairo Marriott Hotel in Zamalek, Marriott Mena House next to the Giza Pyramids, Steigenberger Hotel El Tahrir Cairo, Steigenberger Cecil Alexandria, Sofitel Legend Old Cataract Aswan, Mövenpick Aswan, and Sofitel Winter Palace Luxor.

The sale will help bring in some desperately needed hard currency into the country, with the full value of the transaction set to be paid in USD.

A bigger stake and higher price tag: The initial transaction agreement announced in July saw Icon taking a 37% stake in the company for USD 700 mn.

Where is the money going? The state will use USD 150 mn in proceeds from the transaction proceeds to overhaul and develop the seven hotels, TMG CEO Hisham Talaat Moustafa told Asharq Business (watch, runtime:1:24). “The purpose of this investment into Legacy is to develop and upgrade these hotels to bring their operational efficiency to higher levels, enabling them to attract higher quality of tourism to Egypt,” the TMG statement said.

Icon's’s portfolio post acquisition: With this new batch of hotels under its belt, Icon now owns 15 hotels across Egypt and around 5k rooms.

ADVISORS- Talaat Moustafa made a point of thanking our friends at EFG Hermes (including EFG Holding Group CEO Karim Awad) as well Hani Sarie-Eldin, Sarwat Abdel Shaheed, Mohamed Abou Shoka, and Ernst & Young.

Sound smart #2- 10-20% of the proceeds from privatization transactions typically go to the state’s treasury, while the rest is returned to the ministry or agency to reinvest, a government source told Enterprise. If the selling price is settled in foreign currency, the central bank exchanges it for the ministry to use it as it wishes.

A recent example: The sale of a stake in Eastern Company, where the government now plans to use the bulk of the proceeds to invest in state-owned fertilizer plants.

WHERE DO WE GO FROM HERE?

The program so far: The government has so far secured about USD 5.6 bn from selling stakes in 14 state-owned companies, Madbouly noted.

What are those 14? A senior government official we spoke with listed them as follows:

  • The April 2022 acquisitionby ADQ of state-owned stakes in five EGX-listed companies for a total of USD 1.8 bn — namely: CIB, Abu Qir, Mopco, Alex Containers, andFawry.
  • PIF’s USD 1.3 bn acquisition in August 2022 of stakes in Mopco, Abu Qir, E-finance, and Alex Containers;
  • USD 2.5 bn this year from the sale of stakes in Pachin, Telecom Egypt, Eastern, Al Ezz Dekhila, Legacy Hotels;
  • An imminent sale to ADQ will make up the rest of the USD 2.5 bn for 2023. The Abu Dhabi wealth fund is set to buy stakes in Ethydco, Egyptian Drilling Company, and Egyptian Linear Alkyl Benzene.

More companies could join the privatization program soon: The Madbouly government, alongside the International Finance Corporation (IFC), has been looking into 50 state-owned companies to determine which sectors would be more attractive and lucrative. The IFC sees potential in airports, communications, ins. and banking.

ALSO: Madbouly last month said that the government is looking to bring in private sector operators to run some of the nation’s airports. We expect to see infrastructure and financial services offerings added to the privatization program in 1Q 2024 after comments from Soliman said earlier this month.

A non-update on IMF talks: “Negotiations with the IMF haven’t stopped,” Madboouly said, explaining that the two sides are currently working on a “new [review] schedule” to be announced soon.

Not part of the discussion yesterday: There was no updated on ADQ’s acquisition of stakes in the three oil and petrochemical companies, the sale of Banque du Caire, United Bank, or AAIB, the Gabal El Zeit or Zafarana wind farms, or the Siemens power plants. We had a recap of some of the more interesting assets still out for sale in yesterday’s issue of Enterprise AM.

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