PRIVATIZATION WATCH- e-Finance could make its EGX debut as early as 1Q2020, chairman says: State-owned payments platform e-Finance is putting the final touches on its planned initial public offering (IPO), which could take place as early as the first quarter of 2020, Chairman and Managing Director Ibrahim Sarhan tells Hapi Journal. Sarhan did not disclose the size of the offering, but last we heard the company was wrapping up its business plans and expansion strategy with the aim of helping the government committee in charge of the state privatization program size the transaction.

Advisors: Pharos Holding and Renaissance Capital are joint global coordinators. Zaki Hashem & Partners were previously reported to have been retained as legal advisors, while Baker Tilly was tapped to prepare the fair value report. Inktank is investor relations advisor.

New momentum for privatization program as Banque du Caire said to eye January IPO roadshow? The government is planning to begin next month a roadshow for the sale of a 30-40% stake in Banque du Caire (BdC) as part of the state privatization program, Banque Misr Chairman Mohamed El Etreby said at a conference yesterday, according to Al Masry Al Youm. Banque Misr is BdC’s majority shareholder. The IPO is still slated for 1Q2020, as was previously announced, and has received approval from the government committee overseeing the privatization program to expedite the process, BdC Chairman Tarek Fayed said, according to Masrawy. Fayed did not provide any further details on when the exact size and timing of the transaction would be determined. The transaction is expected to include a primary offering and to see the state sell-down its sale in a secondary sale.

Background: BdC and e-Finance are the first two companies in line to IPO under the state privatization program. The offerings were originally expected to take place this year, but Public Enterprises Minister Hisham Tawfik told us in September that the wave will kick off in the new year. Sources said in August that the government will choose between the two companies for which will go first.

IPO WATCH- EGX needs larger companies to attract more foreign investment -EFG Hermes CEO: The Egyptian bourse needs to attract larger companies to list on the index if it is going to increase foreign inflows into Egyptian equities, EFG Hermes CEO Karim Awad said at a conference yesterday, Al Mal reports. Awad pointed out that the largest company currently listed on the EGX is valued at just USD 5.5 bn, asking: “Where are the companies to invest in?” He also suggested that lowering interest rates will not necessarily push investors to exit government debt and enter equities, given that interest rates are not the only factor that attract capital to the bond market. The right company and the right transaction, however, will attract investor interest.

Volumes and liquidity on the EGX will improve as more IPOs to go to market and as the CBE pushes through more interest rate cuts, Compass Capital Managing Partner Tarek Abdel Rahman said on the same panel, according to an emailed statement (pdf). Abdel Rahman also noted that pension funds account for only a fraction of total investment in the EGX at 2%, “well below the global rate of 20% and the US rate of 49%.” Private equity will play an important role in bringing new offerings to market, he suggested, saying that the last two IPOs executed on the EGX, Fawry and Rameda, both involved companies backed by private equity players.”

M&A WATCH- Endeavour’s bid to merge with Centamin faces hurdle as report suggests CEO De Montessus is target of corruption probe: Endeavour Mining’s USD 1.9 bn bid to acquire gold miner Centamin has run headlong into a report that the company has been the target of a corruption probe by French officials since 2018. British newspaper the Mail on Sunday reported yesterday that the French government has been investigating allegations that Sébastien de Montessus allegedly made fraudulent financial declarations while he was deputy CEO of state-owned French nuclear firm Areva and bribed a foreign public official. De Montessus denies all allegations. The story, broken by the Mail’s business section, has since been picked up by the Times of London.

Endeavour has previously disclosed the investigation, writing in its annual report that “De Montessus’s status in the French inquiry changed in March 2018 to ‘mis en examen’ or ‘under judicial inquiry’, adding: ‘This is an investigative stage of the inquiry and does not equate to being “charged” in the UK and North America.”’ Endeavour’s board “did not consider that the ongoing inquiry would impede De Montessus’s ability to carry out his responsibilities and effectively execute his duties as chief executive officer.”

There are also questions over Endeavour’s attempted merger with Centamin: Officials are also investigating why Endeavour denied Centamin access to company information necessary for it to conduct due diligence after the bid was announced. The London-listed operator of Egypt’s Sukari gold mine last week unanimously rejected Endeavour’s all-share merger proposal on the grounds that it would disproportionately benefit the Canadian firm’s shareholders. Under the plans, Endeavour would have acquired a 52.9% stake in the joint company, while Centamin would control the remaining 47.1%. We noted yesterday that Endeavour was “reaching out to Centamin shareholders” in the hope they would reconsider their rejection of the all-share merger proposal. Both companies declined to comment on the investigation.

M&A WATCH- Adeptio wants Sahar Nasr to intervene in Americana dispute: Adeptio has appealed to Investment Minister Sahar Nasr to intervene in its ongoing dispute with the Egyptian International Tourism Projects Company’s (Americana Egypt) minority shareholders, Al Mal reports. The Gulf-based investment consortium wants Nasr to overturn the Financial Regulatory Authority’s (FRA) decision to block its mandatory tender offer (MTO) for the 9.563% of Americana shares that remain in the hands of minority shareholders. The FRA claimed that Adeptio’s valuation — which priced the shares at EGP 3.9 each — did not represent fair value and was not based on an objective assessment.

Background: Adeptio completed in 2016 the acquisition of a 67% stake in Americana Egypt’s parent company, Kuwait Food Company (Americana), handing them indirect ownership of more than 90% of the subsidiary’s shares. The FRA then ordered Adeptio to submit an MTO to buy the remaining 9.563% shares, which it contested in an economic court only to have the court reject the appeal. A 15-day grace period was set for Adeptio to submit the MTO after Adeptio had requested a 30-day extension on the initial deadline that expired on 21 October on the grounds that it has yet to complete its fair share evaluation on Americana, which the FRA approved.

M&A WATCH- Greek cement company Titan Group will launch a mandatory tender offer (MTO) for 100% of Alexandria Portland Cement “within days,” Alexandria Cement said in a bourse disclosure (pdf). Titan had acquired Alexandria Cement’s parent company, Alexandria Development, which made it an indirect majority owner through a related party and therefore triggered an MTO requirement. The Financial Regulatory Authority had ordered the Greek company last month to present an MTO.

INVESTMENT WATCH- CIRA plans EGP 2 bn in new investment, fresh securitization program: EGX-listed education business CIRA will invest more than EGP 2 bn to develop several ongoing and future projects and will turn to a securitized bond issuance as part of its financing plans, CEO Mohamed El Kalla tells Mubasher. The fresh investment will be used to establish an international university, at least two schools, and a commercial project on recently-acquired land next to its Badr University. El Kalla provided no further details on the bond issuance.

CIRA also signed yesterday a EGP 130 mn loan agreement with QNB to finalize construction work as it adds seven new colleges to Badr University and breaks ground on a planned “Regent School” in Mansoura, according to an emailed statement. The agreement is part two of a EGP 230 mn loan agreed with the bank last May.

Other ongoing investment plans: CIRA has recently made a 10% down payment to NUCA for a EGP 479 mn 76.5 feddan land plot for further EGP 1 bn-worth of expansions to its Badr University, and is separately working on a EGP 2.45 bn private university in west Assiut. The company is also acquiring 60% of UAE-based Starlight Education, which indirectly owns British Columbia Canadian International School (BCCIS).

Growth strategy: CIRA is eyeing bottom line growth of 15% during 2020, and to increase its revenues by 25-30%. The publicly-traded company reported net profits of EGP 221.1 mn in its fiscal year, which ran from 1 September 2018 to 31 August 2019, rising 75% y-o-y. Revenues were up 36% to EGP 704.7 mn.

Looking ahead: The company will continue to focus its growth strategy on differentiation to “cement the presence of its brand,” El Kalla said earlier this year. The company raised EGP 1.24 bn when it made its EGX debut late last year.

INVESTMENT WATCH- Raya Holding to invest EGP 1 bn in home appliance production lines: Raya Holding is planning to set up several new home appliance production lines, an investment that could cost as much as EGP 1 bn, Chairman Medhat Khalil tells Al Mal. The group is in talks with two manufacturers based in East Asia to produce their brands domestically, sourcing at least 60% of the components from local companies, Khalil said. The first production line will produce air conditioners and will begin operating at the beginning of next year. The second, which we took note of last month, will produce Samsung washing machines, and is slated to come online follow shortly after. The company will also begin manufacturing refrigerators and televisions in 2020.

INVESTMENT WATCH- Sphinx to launch USD 100-120 mn private equity fund: Sphinx Private Equity Management will officially launch a USD 100-120 mn private equity fund by the end of 2020 or the beginning of 2021, Chairman and Managing Director Marianne Ghali told Al Mal. The fund will invest primarily in medium-sized enterprises in the industrial sector, but will consider investments in the health and education sectors, with an average ticket size of USD 10-15 mn, Ghali added.

Potential limited partners include development finance institutions, among them the International Finance Corporation, the European Investment Bank, and the German Development Bank, Ghali said.

INVESTMENT WATCH- Spain’s Mediterrania Capital Partners will invest in Egypt through its MC III fund, which is currently looking to raise EUR 100 mn in a second closing planned to wrap up this month, the Africa-focused PE firm’s Egypt advisor Khaled El Saba said, according to Al Mal. Part of the proceeds will be allocated to Egypt, with the fund also planning to put money into projects in the Maghreb (Tunisia, Algeria, and Morocco), Senegal, Ivory Coast, and Cameroon.

Mediterrania targets education, health, B2C firms: MC III is interested in Egypt’s education, healthcare, B2C services, food processing, distribution, and export-bound manufacturing industries, El Saba said. We noted back in January 2018 that the fund carved out a 40% stake in Cairo Scan for a reported EGP 103 mn.

DISPUTE WATCH- Orascom Investment pays EGP 6 mn settlement to SLCC: Orascom Investment Holding (OIH) has paid a EGP 6 mn settlement to the Sound and Light Cinema Company (SLCC) after it failed to carry out contracted work for the EGP 10 mn development project at the Giza Plateau, according to Al Mal. SLCC does not intend to reissue the tender for the development unless it either reaches an agreement with the Antiquities Ministry to renew its concession contract (which expires in 2023) or the ownership of the company is transferred from the Public Enterprises Ministry to the Antiquities Ministry, SLCC Chairman Mohamed Abdel Aziz said. Negotiations between the two ministries are ongoing after the Public Enterprises Ministry suggested passing ownership following a dispute over the share of SLCC’s revenues. Background on the dispute is here.

Speaking of Orascom and the pyramids: Orascom Group’s Gemini Enterprises Africa signed a three-year agreement to hold the annual RiseUp Summit and Pitch by the Pyramids competition at the Giza Plateau until December 2022, according to a company statement (pdf).

BUDGET WATCH- Fuel subsidy spending plunges in 1Q2019-2020: Government spending on fuel subsidies fell 69% y-o-y in 1Q2019-2020 to EGP 7.25 bn from EGP 23.25 bn in 1Q2018-2019, Oil Minister Tarek El Molla said yesterday, according to Reuters. Egypt has moved to gradually reduce fuel subsidy spending over the past three years under the USD 12 bn IMF-backed economic reform program. The latest round of cuts saw prices rise between 16% and 30% in July. The government aims to reduce its fuel subsidies expenditure to EGP 52.96 bn over the course of the current fiscal year, down from EGP 89.75 bn in FY2018-2019.

LEGISLATION WATCH- House planning committee approves PPP Act amendments in principle: The House Planning and Budget Committee gave a preliminary nod yesterday to proposed amendments to the PPP Act that would streamline public-private partnership (PPP) contracts and is set to continue discussing the bill today, according to Al Shorouk. The draft was finalized back in June after receiving cabinet approval late last year.The amendments would cut the time to issue tenders for PPP projects and introduce new mechanisms for private sector contracting, including allowing private sector players to submit unsolicited proposals. The government would also be allowed to negotiate directly with a sole bidder without needing to take the project through the competitive bidding process.

Draft law on dispute resolution gets committee-level parliament approval: The House Legislative Committee also signed off yesterday on draft legislation that would regulate procedures relating to special judicial mediation for out-of-court trade and civil dispute settlements, the local press reports. The legislation applies to all disputes, with the exception of those where ministers or public figures are involved, collective labor disputes, economic or family court cases, disputes resulting from the Investment Act, and cases under the judicial authority of the Council of State. The draft law will now be referred to the House of Representatives’ general assembly for review and a final vote. The Madbouly Cabinet had approved the bill earlier this year.

House preliminarily approves renewing legislation to channel 5-15% of slush funds to state coffers: Parliament’s general assembly also approved in principle a draft law earmarking 5-15% of the annual surplus generated by ministerial “private funds” for state coffers, Ahram Gate reports. The bill would see the state lay claim to the surplus generated by the so-called private accounts (also widely referred to as government slush funds) as of 30 June, 2019. The legislation, a replica of which was also approved last year, sunsets each year and requires renewal.

Special funds are better off remaining separate from state coffers, says Maait: Special funds under the control of individual ministries and other government bodies are best left as they are, rather than merge them with the state budget, Finance Minister Mohamed Maait told the House Economic Committee yesterday, according to the local press. By keeping these funds distinctly separate from the state budget, they are “more effective” and “enjoy greater flexibility” in disbursing their wealth than if they were brought under the umbrella of the national budget, Maait said. These funds are typically maintained outside the budget system and have for years been the subject of scrutiny by both the domestic press and corruption watchdogs.

STARTUP WATCH- Winch eyes USD 1 mn finance for expansion: Cairo-based logistics app Winch is looking to secure USD 1 mn in financing in the coming months to support its expansion plans, CEO and co-founder Ayman Ismail said, according to the local press. The company’s mobile app provides goods and furniture moving services, and has moved EGP 40 mn in goods each month since launching last September. The startup aims to bring that figure up to EGP 600 mn by mid-2020.

EFG Hermes Group CEO Karim Awad — whose firm cracked the top 20 in Bloomberg’s Europe, Middle East, and Africa IPO league table — is our guest on the latest episode of Making It. EFG has transformed under group Awad from a home-grown champion into a true multinational — without destroying the culture that made it special in the first place. Karim joined us in the studio to talk culture, growth and parking your ego at the door.

*** Listen to the episode on: Our website | Apple Podcast | Google Podcast.