Egypt's Sodic to Buy at Least 51% of Medinet Nasr

(Bloomberg) -- Property developer Six of October Development and Investment Corp. said Sunday it will submit a tender offer to acquire at least 51 percent of Medinet Nasr Housing through a share swap, a deal that, if finalized, would create one of the largest real estate developers in Egypt.

Under the terms of the deal, Sodic, which builds upscale developments across Egypt, will exchange one of its shares for every two of Medinet Nasr’s shares, provided that it acquires at least 51 percent of Medinet Nasr’s shares, Sodic said in a statement. The two companies will continue to operate separately, and will remain listed on the Egyptian stock exchange. The deal was first reported by Bloomberg ahead of the start of Sunday’s trading session.

Sodic’s shares rose as much as 10 percent, before paring the gains and finishing up 6.1 percent at 20.18 pounds. Medinet Nasr rose 10 percent to 7.15 pounds, the biggest gain since April and more than any other member of the benchmark EGX 30 index.

“In a fragmented real estate market, the combined entity would consolidate a wealth of experience, as well as sales and execution capabilities of both companies,” Sodic said. “This, coupled with the diversified and prime land bank of both entities, is expected to unlock operational and financial synergies for the shareholders.”

“Based on our calculations, the deal terms seem to be more beneficial to MNHD shareholders,” Naeem Holding said in a research note. “However, taking into account the expected synergies arising from combining MNHD’s rich land bank with SODIC’s brand name and execution expertise, the deal should be beneficial to SODIC shareholders as well.”

“Based on SODIC’s closing price of EGP19.02/share on the 11th of October, each MNHD share is valued at EGP9.5/share; a 46% premium over MNHD’s share price of EGP6.5/share,”Naeem said.

The deal would boost the strengths of each of the property developers. Sodic has strong selling power while Medinet Nasr has a vast land bank in eastern Cairo. If completed, the companies would have a combined undeveloped land bank of over 15 million square meters.

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