Bank to be sold via closed-envelope auction
CAIRO: The deadline for the financial bids for an 80 percent stake in the Bank of Alexandria (BA) has been extended to Oct. 16, The Central Bank (CB) and Ministry of Investment (MOI) announced Saturday. In a statement, CB added a closed-envelope auction will be held over several rounds, much in the same way bidding commenced for the third mobile license in July, to determine the winner.
Neither the CB or MOI gave a reason for the deadline extension or amendment of the bidding process and their officials were not available for comment as of press time.
Sources from several of the six finalists have long predicted the deadline extension because of difficulties in obtaining documents from BA to finish their respective due-diligence exercises. The deadline was originally set for Sept. 25 and the government was to declare the winner as the bidder which offered the best combination of technical and financial bids.
A banking analyst which declined to be identified says it s likely the government gave in to the demands of the bidders because of due-diligence complications, or it might be courting new international interest. Either way, the analyst says the privatization process is still on a track highly unlikely to be reversed by the government at this time.
The government s plan calls for floating 15 percent of BA shares on the Cairo and Alexandria Stock Exchange (CASE) and award employees the remaining 5 percent. BA is the third largest bank in Egypt with assets worth an estimated $7 billion (LE 40 billion) and a 6 percent market share of customer deposits. The bank employs 7,000 workers in 188 branches.
In mid September, the CASE approved the listing of BA with a paid-in capital of LE 800 million.
Former CB Governor Ismail Hassan says the deadline extension and changing of the bidding system may signal the development of fiercer competition over the bank.
I think it s consistent with the government s intention to get the largest possible sum for this institution, says Hassan. It s been successful in previous sales such as the third mobile license and the Sidi Abdel Rahman land. I think it also indicates the government expects highly competitive technical bids so it makes sense to sell to the highest bidder.
Deputy CB Governor Tarek Amer had previously promised the government will not overlook the bidder s technical offers in favour of higher financial ones.
[We want] an institution that has the financial and human resources to manage the bank and protect people’s deposits, Amer said. At the same time, it has to have the ability to develop the bank and help us achieve the economic goals for the state in terms of growth. We know that growth in the private sector helps growth in the national product.
The auction to be held will stipulate each bidder submit a closed-envelope bid in the first round meeting a minimum sum yet to be announced. Once the bids are announced, only the highest bids proceed and the lower ones are eliminated. Low bidders are not afforded a second chance to raise their bids.
The finalists list includes two consortia: Jordan-based Arab Bank Group and the Arab National Bank of Saudi Arabia, and Dubai-based Mashreq Bank and Dubai Investment Group. Egypt s CIB, France s BNP Paribas, Italy s Sanpaolo IMI and Greece s EFG Eurobank round out the list as individual bidders.
Most analysts point out the noticeable absences of two banks previously-thought to have strong interest in BoA, HSBC and Barclays, BoA s original owner before it was nationalized in 1957. In early 2006, Barclays finished the acquisition of Egyptian American Bank.