STOCKHOLM/CAIRO: Sweden’s Electrolux has agreed in principle to buy Egypt’s Olympic Group, the biggest appliance maker in the Middle East and North Africa, in a push to capture growth in emerging markets.
The world’s second-biggest maker of fridges, vacuum cleaners and cookers has had a commercial partnership with Olympic in the region for the last 30 years, letting it distribute brands such as Electrolux, AEG, Frigidaire and Zanussi.
Electrolux said on Monday it had tentatively agreed to pay owner Paradise Capital LE 45.30 ($8) per share for a 52 percent stake and launch an offer for the rest of the company on completion of the deal at the same price.
Based on Olympic’s 60 million listed shares, that makes the initial purchase price worth around $480 million before Paradise buys back two non-core units.
Olympic shares had closed on Oct. 7 at LE 30.06.
"(The deal) means that investors can sell at a premium of 50 percent from current prices…it is a huge premium," said Hamed Hashem, equities analyst at investment bank Beltone Financial.
"I don’t know if (investors) will opt to stay or get out of (Olympic Group), but it’s a very good opportunity to cash in on the company. If they opt to stay, the company has very good potential," Hashem said.
Olympic’s shares surged nearly 43 percent on the news and were up 37.1 percent at LE 41.20 by 1020 GMT, while Egypt’s main index was flat.
Electrolux shares gained 4 percent, outpacing an 0.5 percent rise in Stockholm’s blue-chip index.
"(The deal) is an implicit move (by Electrolux) into emerging markets and obviously it is good to buy your own agent. You don’t need to do any rebranding or anything like that. So you can say it is positive," said Peter Naslund, analyst at Swedbank.
Following announcement of the mandatory tender offer for up to 100 percent of Olympic Group, Paradise will launch a tender offer to re-acquire two Olympic non-core assets, Namaa and B-Tech, for LE 13.88 and LE 3.44 per share respectively.
Namaa and B-tech combined contributed around 26 percent of first-half group revenue and around LE 6 million of the group’s LE 89.2 million profit in the half.
Excluding Namaa and B-tech, the enterprise value of Olympic will be about LE 2.7 billion, Electrolux said.
The acquisition and pricing is subject to a number of conditions including due diligence to be conducted by Electrolux, Olympic Group said in a statement.
Electrolux said Olympic Group had sales of around LE 2.1 billion in 2009 and an estimated volume market share of approximately 30 percent in Egypt. –Additional reporting by Victoria Klesty in Stockholm