The move comes within its plan to provide funds for companies to expand, without taking from the state treasury which faces a liquidity deficit. The portfolio includes shares in oil companies, as well as holdings and food industry companies.
Through this step, the government plans to pump more investments and restructure the companies which are in need of financial development.
Some financial experts believe these public efforts are positive and will relieve pressure on the state treasury. New projects would receive funding and the financial states of these companies would be restructured, to help expand their ownership in these assets.
Experts, however, demanded that oil and supply officials receive the help of more than one financial advisor and under the supervision of the Accountability State Authority (ASA). This would define a fair value for companies’ shares which would be offered after technical and financial evaluation of the company through due diligence investigation. It would also add future expansion plans of the company, for the next five years, to the proposal.
Offering these companies for tender will be the first of its kind by the government in the financial market since the tender of Egypt Telecom, AMOC, and SIDPEC in the EGX in 2005.
Ministry of Petroleum revises portfolio assets to offer EGX shares
The Ministry of Petroleum is conducting a thorough and active revision on its assets portfolio to find a way to economically manage its asset income. This would form part of a development plan for the sector, which is expected to be complete within the next few months, according to Petroleum Minister Sherif Ismail.
Ismail announced the ministry is currently choosing between 10 companies in the sector to offer them in the Egyptian Stock Exchange (EGX) within this year. Two of the biggest companies owned by the ministry are Middle East Oil Refinery (MIDOR) and Misr Oil Porcessing and Fertilisers Company (MOPCO).
MOPCO owns Agrium Project and is the third biggest nitrogen producer globally. The minister said they would go through the companies’ names before finalising the study to decide the readiness of the companies for the tender. The ministry is currently looking into this matter with the EGX and the National Bank of Egypt.
Ismail added that the Ministry of Petroleum is studying the offering of 10 companies on the EGX. In case the 10 companies met EGX conditions, all of them would be offered. Companies, on the other hand, which would not meet the EGX’s terms will be restructured to be eligible for the tender offer.
Oil sector experts believe the sector is in great need of new capital that both improves performance and technology, which is currently a burden on the state. Private sector investors must also participate to increase ownership of these assets.
By the end of February, the ministry said it may sell a major share of some companies while keeping a share for management in other companies. This would be done depending on the strategic importance of each company.
The Egyptian General Petroleum Corporation (EGPC) owns 98% of MIDOR shares both directly and indirectly, while the Suez Canal Bank owns the remaining 2%. The company’s land area is 500 acres west of coastal Alexandria, and takes 25% of local consumption of oil products in Egypt.
According to a Ministry of Petroleum source, negotiations with banks to offer private sector companies’ shares in EGX are taking place. He added that Egypt’s oil sector is planning to provide roughly EGP 15bn from offering companies’ shares in EGX, to provide fund for the implementation of projects the sector needs.
However, in a February press release, the minister said the amount expected to be provided through these tenders has not been set yet, and that studies are still being conducted.
The source added that the tender offer will include companies working in oil refinement, petrochemical, and marketing, to reform the administrative structure of some companies. The portfolio includes: MIDOR; MOPCO; Alexandria National Refining & Petrochemicals Company (ANRPC); GANOPE; Nasr Petroleum Company; Amreya Petroleum Refining Company; and the Egyptian Ethylene and Derivatives Company (Ethydco).
Expectations point to a new share offer of SIDPEC and Alexandria Mineral Oils Company (AMOC), registered on the EGX. The capital offered for subscription is yet to be defined.
EGX public company tenders will increase liquidity, fund companies expansion: Experts
Financial market experts confirmed oil companies tender offers and increasing capital of some holding companies in the food industry on the Egyptian Stock Exchange (EGX) are positive steps. It confirms the government’s effort in EGX as one of its important fund sources.
They also said that both the oil and the food sectors are vital sectors that would have positive impacts on the EGX and help attract new investors.
Former EGX vice president Mohamed Farid announced that offering to increase public companies’ capital in EGX is a good step by the government. This is especially following the recent exit of several companies from the stock market as a result of Egypt’s unstable situation over the past four years.
“It is preferable to offer new unregistered companies for tender in order to provide new offers and lure investors in the financial market,” Farid said. “Offering public companies in EGX is not considered privatisation; it is merely a participatory step between the state and the private sector to raise income and provide fund.”
He added that the government’s steps will allow it to increase the capital of its companies in order to fund new expansions aside from the state treasury. This will oblige companies to use transparency and reveal their plans as well as their social responsibility.
“This tendency will have its effect on the oil sector through its ability to establish petrochemical companies and fund part of their capital through EGX,” Farid announced. He confirmed that the stock market will also witness great development in its performance to be able provide investments in the sector. It would also boost its role on the stock market aimed at increasing investments in the oil sector, the state’s strategic sector, which will later reflect positively on the Egyptian economy as a whole.
Financial analyst and expert, Mohsen Adel, said offering public companies for tender is positive. He confirmed the market will be interested in any new capital, provided that it be powerful and with potential of growth.
Adel added this will give the state chance to directly use fund through expanding the ownership, which would be a greatly positive expansion in the public fund tendency.
“This is a good step for companies to develop and expand their investments,” he said. “Tenders would make a great leap in the way these companies manage their financial statements and commit to transparency.”
Adel also said that offering oil companies’ shares reflects the government’s stock market vision as one of the important sources for funding projects that support companies’ expansions through investments without having to be indebted, as debt has burdened the sector and hampered its activities and expansions.
According to Adel, the sector’s EGX shares, including shares from Egypt Gas, SIDPEC, and AMOC, contributed to increasing the value of these companies. This has resulted in a jump in their income and total assets, while these companies’ share prices rose, except for Egypt Gas.
SIDPEC’s offers had the most positive impact on the company, through increasing their assets double the number before as well as a significant rise it its income and revenue, Adel added.
These companies attracted many investors and investment funds due to their high income distributions, and the continual financial improvement following the tender of its shares in EGX. However, these shares had limited exchange volume.
Financial experts highlighted the importance of more than one financial advisor to the Ministry of Petroleum under the supervision of the Accountability State Authority (ASA). The supervision would define a fair value for companies’ shares offered after technical and financial evaluation of the company in a diligence investigation. It would also add future expansion plans of the company, for the next five years, for tender.
They also said that the government has to keep shares of the companies to be offered, to prevent total acquisition of the company after being offered on the stock market. In case one of the investors has a percentage of the capital, the government, as per the law, would have the right to propose a compulsory tender offer to own these companies.
Farid praised the government’s use of the EGX through financial restructuring of some companies under the Ministry of Petroleum’s umbrella as well as holding companies in the food industry. It is also a good long-term investment, considering governance and transparency laws imposed by EGX on these companies, while putting future expansion plans of the companies.
Farid added that the current laws imposed by EGX will have a positive reflection on companies on the long run, through defining a fair value of these companies, which would greatly attract foreign investors to pump more investments in these companies, and this would be required to reduce fund burden on the government, while keeping its governance share of the company.
Discussions with electricity ministry over launching shares of its companies; facilities are being studied to reregister others: EGX Chairman
Discussions are currently ongoing with different governmental bodies, most importantly the electricity sector. The discussions come especially after the petroleum and supply sectors’ plans to launch company shares on the stock market, to fund future expansions, Chairman of the Egyptian Stock Exchange (EGX) Mohamed Omran said.
“We are communicating with the government to launch shares of companies of which it contributes to their ownership, especially in sectors of electricity and petroleum,” said Omran. He assured that he communicates with the companies that meet requirements to be reregistered in the market, offering facilities to them.
He continued: “My discussions with Ministers of Petroleum and Supply included the EXG role as a platform for financing and what it can contribute to offering needed funds for the petroleum companies and the subsidiaries of Food Industries Holding Company (FIHC) during the next period, which requires huge investments in these important vital sectors.”
Way of benefiting from EGX in funding a number of promising companies will be taken into consideration. These companies need more investments or restructuring that develop the financial status, without adding to the general budget more burdens.
The Ministry of Petroleum has portfolios of strong companies with high solvency, Omran said, assuring that the petroleum companies’ experiments previously were very promising.
He added that the EGX’s main role is funding these companies and offering them expansion and growth opportunities, saying that EGX has provided EGP 100bn over the last decade.
Omran said he believes in the market’s ability to provide bigger funds for the companies, in case of launching companies with strong solvency. The last period, in particular, has proven that investors are thirsty to new good commodities.
The stock market witnessed the last initial public offering in May 2014 of the stocks of Arabian Cement at approximately EGP 700m. The stock exchange seeks to attract new big companies to the market to refresh it after a long period without big offerings.
Both companies Edita and Orascom Construction are willing to launch their shares in the EGX in March; other companies like Emaar Misr is also planning to launch its shares in the second quarter of the year, moreover, companies like Etisalat Egypt and Nile Sugar are working on launching their shares during this year.
Food sector is inviting a huge base of investors and is experiencing great growth opportunities: Supply ministry
Minister of Supply Khaled Hanafy announced the launching of shares for Food Industries Holding Company on the EGX, a new governmental orientation to restructure the holding companies. The restructuring comes under Law 203/1991 as part of an increase in their capitals and to attract new local and international investments.
The launch will improve the belonging companies and will lead to achieving profits which will benefit employees. As a result, their financial income will increase and the standard of living will improve the minister stated.
Hanafy said the EGX has a huge base of local and foreign investors wishing to expand their investments in promising companies, especially in the Egyptian Food Sector as it is experiencing great growth opportunities.
The last few months have witnessed competition to acquire some companies in the Food Sector like, Bisco Misr and Arab Dairy Production Company (ADPC). As Hanafy believes, the presence of companies belonging to the Supply Sector, in the market, will be strong.
Hanafy added there is a fear the state will suffer from the privatisation of government companies. His response, however was: “The shares` launch does not mean selling companies; it means using the computational finance to restructure companies that belong to the ministry, which will lead to the improvement of the companies` administration and the attraction of new investments in order to increase the capitals of the belonging companies.”
He mentioned that the shares` launch will defiantly lead to the improvement of the services offered to the average citizen. The governance and the transparency accompanied by registering the companies in the stock market, helps protect public money and achieving the major benefits, he added.