CAIRO: Minister of Investment Mahmoud Mohieddin announced last Monday that the employees of Omar Effendi, Egypt’s largest state-owned department store chain, with more than 80 outlets, will retain their company benefits after the company is sold as part of the government’s asset management program to privatize retail department stores.
In a meeting with the Minister of Manpower and Emigration, Aisha Abdel Hadi, Mohieddin was said to have assured Abdel Hadi that an improved early retirement scheme will be available for workers of this 150-year-old store.
Mohieddin also requested that the company’s employees be given a three-month bonus after the sale has been signed and approved by the general meeting of the Holding Company for Trade, the company that Omar Effendi sits under since the early 1990s, the first move taken by Omar Effendi when the company was first looking toward privatization. Mohieldin also added that another bonus will be given six months after the contract.
The sale of Omar Effendi was stalled then failed during two subsequent attempts to sell off the group in 1999 and 2001, as bidders were reluctant to take on board the stores payroll of 6,000 workers. Bidders also hesitated due to the asking price made by the government, stating that, without reconstruction and overhaul costs included in the bid price, the cost of Omar Effendi was simply too high for the value.
According to an article by Al Ahram Weekly, in 1999 a memo that was submitted to Public Enterprise Minister at the time, Mokhtar Khattab, placed the valuation price for Omar Effendi at LE 593 million, which left a large gap between the asking price and the offers made by bidders. In addition, the costs of renovation and upgrading were estimated at the time to LE 40 million.
“We don’t actually know the valuation price for Omar Effendi placed by the government, says Rana Durra, Vice President of HC securities and Investments, the investment bank that represented two of the highest bidders in 1999 and 2005. “We heard that the government was expecting LE 600 million, but that was never confirmed.
In 1999 HC managed the bid for Sona’a Masr, a group of five local companies, including Bahgat Group and Olympic Group, which at the time were the highest bidders, their offer just short of the LE 300 million mark.
The Sultan Centre (TSC), which is based in Kuwait and whose bid in 2005 was managed by HC, offered LE 300 million in 1999.
Needless to say, the expiration date for bids came and went, and no winner was selected.
“Because of the problem of overstaffing, not many investors were interested, says Durra. “The government decided to take the company off the market, restructure it, then come back to privatizing it.
Rumors that bidders were planning to lay-off a major number of the company’s workforce was also a cause for concern to the government, which led them to modify their stipulations to include that the rights and privileges of the company’s workforce must be preserved.
Omar Effendi was then taken off the market in December 1999, shortly after TSC and Sona’a Masr had laid their bids on the table.
Then in 2000, in an attempt to attract bidders by lessoning the load facing investors, Omar Effendi started offering its employees early retirement packages. The company also renovated a number of their outlets in order to lesson the burden of overhaul and renovation costs that previously deterred potential bidders from coming forth.
The ministry is also revamping its methods to compensate workers and provide more attractive incentive schemes for investors.
In a press release issued by the Ministry of Investment, Mohieddin said the holding company should retain 10 percent of its shares in the company. Workers should also be able to purchase a stake of the holding company s shares once they have the necessary resources, he said in the press release.
“The board of the company and syndicate should exchange views regarding the workers best interests, said Abdel Hadi in the press release.
The meeting was attended by the chairman of the Holding Company for Trade, Hady Fahmy; the chairman of Omar Effendi Company, Ezzat Mahmoud and representatives of both companies and the syndicate committee.
The deadline for the bid offers was Feb.15, 2006. According to Durra, as far as HC understands, the winning bidder will be announced within two days, once the selection committee meets and takes a decision.
This time, the heat is stronger. “In 1999, there were very few foreign bidders, says Durra. “But now, with our economic and investment climate, more foreign investors are interested in Egypt, and the retail market in specific, and Omar Effendi is an ideal way to get in.
Omar Effendi was founded in 1856 and initially traded under the name Orosdi Back. It was then sold by the original owners in the 1920s, underwent a change of name to become Omar Effendi, and was nationalized in 1957.
It flourished until the 20th century, when it started facing growing competition from retail stores that offered more products and better service.
The company’s customer base also began to slowly dwindle as its high-end customers turned to privately owned retail shops. This was reflected in the company’s financial performance, which took a nosedive under poor sales and a massive employee payroll.