The government is hastening to put its shares in state-owned banks and oil companies up for trade on the Egypt Exchange (EGX), by contracting with NI Capital of the National Investment Bank as the initial public offering (IPO) adviser.
The IPO programme the Ministry of Investment announced earlier comes within the government’s plan to diversify investment sources to push growth rates forward, minister Dalia Khorshid said in a press release issued on Sunday. The programme aims to attract indirect local and foreign investments worth $10bn over three years.
Ashraf Ghazaly, CEO of NI Capital, told Daily News Egypt that the programme will span five years. He noted that consultations are underway with several investment banks and national and international legal consulting firms to put together a list of companies and plan the timing for IPOs, as well as the price of their shares. “Public business companies are not included in this phase,” Ghazaly explained.
He added that final contracts for legal advisers and banks will be signed within three months.
The programme will mainly focus on successful companies. “We will not offer losing goods on the market,” Ghazaly said, noting that the most prominent companies include oil and gas companies, and banks.
He added that the programme also includes capital increases through the EGX next to selling shares of companies. This aims to expand shareholders’ bases and increase the market capital on the EGX. Losing companies will go through administrative restructuring and financial reforms before putting them up on the EGX.
Ghazaly pointed out that the programme is different than privatisation and public sukuk, adding that the state does not want to sell losing companies, in order to restructure them.
According to the investment minister’s press release, the government will put up part of state-owned companies’ stakes on the EGX and international stock markets under the supervision of a new committee of the ministers of investment and finance and the Central Bank of Egypt (CBE) deputy governor.
The government owns a large number of companies in various fields, including Arab Contractors and Hassan Allam in construction as well as Petrojet and ENPPI in the oil sector.
The last government IPO dates back to 2005, when Telecom Egypt and Sidi Kerir Petrochemicals put up their shares.
Ghazaly said that the move will stimulate capital flow and trade in the EGX. It will also lift the companies’ market capital, making them more attractive for investors.
The EGX saw three IPOs worth EGP 6bn last year: Edita, Emaar Misr, and Orascom Construction.
NI Capital, along with selected investment banks, will manage IPOs to pen a timetable for the programme according to market conditions.
Back in March, CBE governor Tarek Amer said the government intends to offer part of its shares in the Arab African International Bank (AAIB), and 20% of Banque du Caire on the EGX. Moreover, he noted that United Bank will be sold to a strategic investor.
The government owns the National Bank of Egypt, Banque Misr, Banque du Caire, and the United Bank, as well as 50% of the AAIB and 20% of Alexandria Bank.
Egypt sold about 80% of its share in Alexandria Bank in 2006 to Italy’s Intesa Sanpaolo Bank for $1.6bn.
The EGX has 270 companies listed and 500,000 authorised traders. However, only 100,000 investors carry out transactions.