Egypt Eyes $5.7 Billion Windfall From State Company IPOs

20 Mar 2018, 09:13 AM IST

(Bloomberg) -- Egypt is seeking to raise up to 100 billion pounds ($5.7 billion) by selling stakes in more than 20 state-owned companies, including additional shares in market heavyweights Eastern Tobacco and Abou Kir Fertilizers & Chemicals.

Ten companies including the Midor refinery will see their shares floated for the first time and additional equity will be sold in others already listed on the Cairo stock exchange, the government said on Sunday. The stakes offered will range from 15 percent to 30 percent and the sales will take place over the next 24 to 30 months.

Shares of the listed companies climbed.

Egypt has been promising for two years to IPO stakes in state-run companies, part of an effort to boost the stock exchange and restructure bloated public-sector companies by making them accountable to investors. Egyptian officials have said the focus would be on financial and energy companies.

“We see the program as positive for the market, as it will lead to a larger market cap as a result of new IPOs and a larger float market cap due to secondary sales of stakes in already-listed securities,” Cairo-based EFG-Hermes said in a research report on Monday. “This should help attract more inflows into Egypt, in our view, and raise market turnover.”

The sales would include 24 percent of oil company Enppi and a stake in Banque du Caire as previously announced, Oil Minister Tarek El-Molla told reporters late on Sunday. A statement released by the cabinet showed that 23 companies were on the list. They include:

Companies already listed on the bourse:

Eastern Tobacco
Abou Kir Fertilizers & Chemical Industries
Medinet Nasr Housing
Heliopolis Housing
Sidi Kerir Petrochemicals Co.
Egypt Aluminum
Alexandria Mineral Oils Co. (AMOC)
Housing & Development Bank

State-owned companies scheduled for market debuts:

Enppi
Banque du Caire
Midor
Misr Insurance
Egyptian Ethylene and Derivatives Co.

Stocks Surge

Egypt Aluminium surged 8.3 percent as the biggest index gainer, to 65 pounds per share as of 11:45 a.m. in Cairo. Heliopolis Housing rose 4.7 percent to 38.2 pounds per share and Abou Kir Fertilizers gained 1.8 percent to 33.58 pounds per share. The Benchmark EGX 30 Index added 0.2 percent to 17,299.98.

“The market has already factored in the news since the government has been talking about this program for a long time,” said Mohamed Ashmawy, head of institutional sales at Prime Securities in Cairo. “We need more clarifications and details to say what the impact will be.”

The share offerings build on economic revival efforts that began with the November 2016 decision to float the currency to end a dollar shortage that had crippled business activity. That move helped secure a $12 billion International Monetary Fund loan, boosting investor confidence in an economy that had struggled since President Hosni Mubarak’s 2011 ouster.

The details of the IPO program were announced as the government unveiled the fiscal 2018-19 budget that the cabinet approved on Sunday. The spending plan is based on a target of 5.8 percent economic growth and seeks to cut the deficit to 8.4 percent of gross domestic product from an estimated 9.7 percent in the current fiscal year.

The new budget puts spending at 1.41 trillion pounds, with revenue at 980 billion pounds. It also looks to cut unemployment to 10.4 percent from more than 12 percent currently, Planning Minister Hala El-Said told reporters.

--With assistance from Mirette Magdy and Tamim Elyan

To contact the reporters on this story: Abdel Latif Wahba in Cairo at alatifwahba@bloomberg.net, Tarek El-Tablawy in Cairo at teltablawy@bloomberg.net.

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Amy Teibel