Aldar Offers to Buy Stake in Egypt’s Sodic; Shares Climb

Aldar Properties PJSC offered to buy a majority stake in Egypt’s Sixth of October for Development & Investment Co. as it looks to expand into Arab world’s most populous country.

The offer values the Egyptian property developer, known as Sodic, at about $420 million. Aldar is seeking a minimum 51% stake in Sodic, with an indicative purchase price of 18-19 Egyptian pounds per share.

Aldar, which primarily operates in Abu Dhabi, has been looking to expand abroad as it faces limited growth prospects in the United Arab Emirates. Home prices and rents have dropped for nearly seven years in Abu Dhabi, and the coronavirus pandemic aggravated the situation.

This deal “gives Aldar entry into a growing real estate market,” said Harshjit Oza, head of research at Abu Dhabi-based International Securities LLC. “The UAE market’s demographics have limitations in terms of population growth, while Egypt is a big real estate market, with young and growing population, which can give Aldar that edge.”

Sodic is active in the upscale property market in Egypt. In 2019, it had sought to strike a deal with Medinet Nasr Housing & Development that would have expanded its land bank. The deal, however, collapsed.

Offer and shares:

  • The midpoint of the offer range values Sodic at 6.6 billion pounds ($420 million), or about 14% premium to the company’s closing share price on March 11
  • A mandatory tender offer will be extended to all Sodic shareholders, as required by Egyptian market regulations
  • The non-binding offer is subject to due diligence and regulatory approval in both countries
  • Sodic shares jumped as much as 7% in Cairo trading on Sunday; they are up 17% this year
  • Aldar shares rose 2.2% in Abu Dhabi; they are up 18.4% this year

Geographic diversification has been a major focus for Aldar, which has been exploring an entry into Egypt for years. The company’s new operating model this year saw the developer setting up a subsidiary aimed at Egypt.

“Acquiring Sodic is a good strategy” for Aldar, Oza said. “Sodic has a large land bank as well as development business and recurring income portfolio. So it’s similar to Aldar and both stocks are well known to the emerging market investors in the region.”

©2021 Bloomberg L.P.

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