EXCLUSIVE- Gov’t considers jumpstarting privatization program in March: The government committee tasked with managing the state privatization program is considering jumpstarting share sales in state companies as early as March provided market conditions hold up, a senior government source told Enterprise yesterday. He made sure to note that at this point, the date remains under discussion in the committee and with advisers to the program. The story comes as new mandates were reportedly awarded to investment banks to advise on key stake sales. A consortium formed by EFG Hermes and Citi has reportedly won the mandate to run the sale of an additional stake of Alexandria Container and Cargo Handling, while CI Capital and Renaissance Capital will jointly advise on the sale of a 30% stake in Abu Qir Fertilizers.

A shakeup in the program lineup? The source said that the committee was mulling changes to the initial list of 23 companies that were set to see stake sales. The committee has provisionally added c. 10 new companies to the list, the source said, confirming previous statements by Public Enterprises Minister Hisham Tawfik. Other companies on the original list have been set aside for now, the source said.

Eastern Tobacco still likely to kickstart the program: The sale of a 4.5% additional stake in Eastern Tobacco is likely still in line to pilot the program, the source told us. Advisers, including EFG Hermes — which was tapped to manage the transaction last September — are continuously monitoring markets to ensure that the target share price can be met, the source added.

Background: Phase one of the program was delayed last year as the Emerging Markets Zombie Apocalypse bit the EGX. A number of companies in the program announced conditions before proceeding, including Eastern Tobacco, whose stake sale hinges on the share price rising to EGP 18.70, and AMOC, which is looking to return to profitability before selling shares.

M&A WATCH- Qalaa inks MoU to raise stake in key subsidiary Egyptian Refining Company: Qalaa Holdings has signed an MoU with Qatar Petroleum to purchase an additional stake in the Egyptian Refining Company (ERC), which owns the USD 4.3 bn Mostorod refinery, Qalaa said in a statement to the EGX (pdf). Qalaa is in “advanced stages’’ of securing the financing needed for the transaction, which would raise its effective ownership of ERC to 23%, and expects to reach financial close in 2Q2019. The statement did not provide further details on the anticipated value of the transaction.

Background: Qalaa Managing Director Hisham El Khazindar had said in September that Qalaa could increase its stake in ERC through a capital increase. Qalaa is planning to sell shares in the parent company of ERC along with its unit TAQA Arabia at early 2020. ERC’s USD 4.3 bn refinery in Mostorod is slated to begin operating in May 2019 and hit its stride in revenue and profitability in the second half of the year.

M&A Watch- Cairo 3A in talks to acquire Pyramid Poultry: Agricultural commodity trader and manufacturer Cairo 3A is in talks to acquire Pyramid poultry as part of its expansion plan, sources tell Al Mal. The negotiations are in an advanced stage and a deal might be reached 1Q2019.

Advisors: CI Capital and Al Tamimi & Company are advising Pyramid Poultry while Matouk Bassiouny is advising Cairo 3A.

M&A WATCH- Bank Audi mulls acquisition of National Bank of Greece branches in Egypt: Bank Audi is considering an offer for the local branches of the National Bank of Greece (NBG), sources tell Al Mal. The Lebanese lender has requested approvals for due diligence before making an offer. NBG was given the green lightlast summer to receive acquisition offers for its portfolio and assets and exit the Egyptian market.

Raya boss says he’s redirecting EGP 300 mn in investments outside Egypt: Raya Holding for Financial Investments is redirecting elsewhere up to EGP 300 mn of investments that were initially planned for Egypt, Chairman and CEO Medhat Khalil tells Al Mal. Raya is in talks to raise its stake in Poland’s Makarony Polskie to 30%, putting it on equal footing with the Polish pasta-maker’s biggest shareholder. The company is also expanding its electronic devices and home appliances distribution business in Nigeria. In the Gulf, Raya has established a logistics company at Dubai’s Jebel Ali and will import electronics raw materials for resale to entities operating in the area. It has also finished the procedures for establishing a contact center company in Saudi Arabia.

Raya is also holding back on the potential listing or spin-off of a number of its units, he told the newspaper.

So why is Raya changing its mind about Egypt investments? Red tape: Raya subsidiary BariQ’s recycling factory halted production for over a month and a half after running out of raw material after the Environment Ministry revoked its approval of imports. The Administrative Control Authority stepped in to resolve the issue, but the factory, which exports most of its production to the US and Europe, cannot sell its output locally due to the absence of Egyptian standards. Raya has also faced licensing hurdles to sell or export products from several other facilities, including locally-assembled three-wheelers and frozen food products.

All of this comes as Khalil is pushing ahead with a take-private bid for Raya, which has transformed from a distributor and call-center operator into an investment company. That bid was effectively forced on him by the Financial Regulatory Authority (FRA), which found that Khalil and related parties control a combined 42% stake in the company, a percentage that requires an MTO under s securities regulations. Khalil is bidding to take Raya private via a mandatory tender offer for 36.7% of the company’s shares.

CI Capital and Shuaa Securities Egypt want to become market makers: CI Capital Securities Brokerage and Shuaa Securities Egypt are in talks with the Egyptian Exchange to become market makers, according to local press reports. Brokerage firms are standing in line for the market maker license after the EGX issued its regulations earlier this month. Under the regulations, brokerages are required to receive approval from the Financial Regulatory Authority (FRA) to act as market makers, after which they must register with the EGX before carrying out any transactions.

Emaar vs. El Nasr dispute resolved, minister says: A settlement has been reached between Emaar Misr and state-owned El Nasr Housing & Reconstruction over a disputed land plot and delays in execution pertaining Emaar’s Uptown Cairo project, Public Enterprise Minister Hisham Tawfik tells Masrawy. The companies are now in talks about post-resolution issues regarding the project, Tawfik said.

Background: El Nasr alleged that Emaar Misr failed to develop 3 mn sqm of land allotted to it back in 2005. The state-owned company also alleged that there are 215k sqm of Uptown that are technically outside the project’s borders. Emaar offered EGP 100 mn settlement but received no response and the dispute was sent to the Cairo Regional Center for International Commercial Arbitration awaiting a ruling. Tawfik told CBC channel earlier that Emaar would pay the EGP 100 mn to El Nasr while 5% of the project land would either be returned to Cairo Governorate or Emaar would buy it at market value.

EARNINGS WATCH- Cairo for Real Estate and Investment (CIRA) reported a 39% y-o-y increase in net profit to EGP 74.3 mn in 1Q of its fiscal year, which ended 30 November 2018, according to the company’s earnings release (pdf). Revenues rose 31% y-o-y in the quarter, coming in at EGP 200.9 mn, following the enrollment of an additional 2,833 students across 19 K-12 schools as well as 2,309 new enrollments at Badr University, the company said. “We delivered double-digit growth of 31% at our top-line driven by the strong demand for our services, while prudent cost management has allowed us to improve profitability with a two percentage-point expansion in our net profit margin for the quarter,” the company noted.

Looking ahead: CIRA is focused on growth, planning to fast-track its EGP 1.1 bn, 3-5 year investment plan focused on primary and tertiary education as well as healthcare. “CIRA is intent on developing the capabilities and infrastructure to accommodate the forecast growth in BUC’s student body and establishing Badr University as one of Egypt’s premier institutes of higher education. We are also actively screening opportunities to expand our K-12 presence leveraging our plug-and-play business model.” The company is also looking to begin with the EGP 2.5 bn development of a university west of Assiut after being awarded an 81-feddan plot.

MOVES- Well-known tax professional Nesreen Maher (LinkedIn) has joined PricewaterhouseCoopers Egypt as a partner. She joins PwC from EY and, if we’re not mistaken, has her first day in the office today. Maher has more than 20 years of experience in compliance and advisory roles across corporate, indirect and withholding taxes (including in dispute resolution) and is both a qualified chartered accountant and a CPA. “Nesreen will help PwC drive growth in the market using her extensive network of relationships and contacts,” a company exec told us. “She has a particular interest in the coaching and development of her team members and is very focused on the diversity agenda, having been an active member of EY's Middle East and North Africa Women's Network.”

Egypt secures USD 1.2bn China EximBank loan for new capital light railway: China’s Export-Import Bank (EximBank) has agreed to extend a USD 1.2bn loan to Egypt for the construction of a light railway running between Egypt’s new administrative capital and 10th of Ramadan city, Transport Minister Hisham Arafat has said, according to Reuters. The loan carries an interest rate of 1.8% and matures in five years, he said, adding that $739 million will be spent on trains and the remaining $461 million on infrastructure. The 68-km line will be built by five state-owned companies alongside three private sector firms over the next two years, Arafat said, without naming them.

Gov’t inks PPP schools agreement with investors: The government has signed a public-private partnership pacts with a number of investors to build and operate schools with a total of 910 classrooms and an estimated cost of EGP 500 mn as part of the first phase of the program, the Cabinet said in a statement on its website. The first offering saw 24 land plots in six governorates awarded on 30-year usage terms to five consortiums. A second offering will take place in February.

Background: The government expanded the PPP schools program in September to include 1,000 schools and said phase two of the program consisting of 200 schools will be offered in a tender that was planned to take place last December. It isn’t clear, however, if yesterday’s announcements were for the second phase or another program.

CABINET WATCH- Madbouly Cabinet focuses on Afcon 2019: The Madbouly cabinet focused at its meeting this week on preparations for the African Cup of Nations 2019 tournament, for which Egypt host rights earlier this month. Prime Minister Moustafa Madbouly instructed the cabinet that the tournament, which will be held from 15 June to 13 July, is a top priority, charging the Planning Ministry with obtaining funding for the preparations, according to a cabinet statement. He also ordered the government to coordinate security for the tournament with the Armed Forces and the other security agencies.

Other cabinet decisions included:

• Approving Egypt’s membership to the African Continental Trade Agreement (AfCFTA);
• Approving a draft law establishing a Technology and Innovation Finance Authority which will be charged with funding research and technology development;
• Approving EUR 48 mn in funding from Germany for renewable energy, SME finance, and education projects;
• Classifying all development work undertaken by the Armed Forces Engineering Authority on the state’s 1.5 mn feddan land reclamation program projects as a national project. Cabinet also granted the Armed Forces the authority to issue licenses and subcontract to anyone it sees fit on its end of the project.

Two Danish tourists reportedly dead in Hurghada, cause unclear: Danish paper CPH Post Online reported that that two Danish men died under unclear circumstances while on holiday in Hurghada around New Year’s. Verner Strunck and Leif Kristensen, both apparently healthy men in their sixties, died two days apart at their hotel in what family members have speculated may have been due to bacteria from the air conditioning systems in their rooms. The case has echoes of another case that saw a British couple die after apparently having contracted Legionnaire’s disease through an air conditioning system.