The second half of the 2017 saw the return of the mergers and acquisitions activity after the exchange rate stabilised the financial results of companies cleared. The government inclination towards financial inclusion and renewable energy projects also supported the acquisitions activity in the sectors of financial services and energy. BPE Partners seeks to include more companies to its investment portfolio through using the proceeds of increasing its capital through listing on the Egyptian Exchange (EGX) and exiting projects.
Founding Partner of BPE Partners, Aladdin Saba, said that the company submitted the fair value study of its shares last month to the Egyptian Financial Supervisory Authority (EFSA) to create an initial public offering to increase the company’s capital by 30%, with proceeds of EGP 400-450m.
He explained that the proceeds will be used to enter into a number of new investments, whether through the Ebtikar platform or in the sectors of energy, education, health, and food.
He pointed out that financial technology (fintech) services are the main goal in the coming period, as the introduction of technology to old services reformed them, which was the main reason behind establishing Ebtikar.
“In most countries of the world and Egypt, we are still at the beginning of fintech, where there are many services coming to Egypt in the financial sector through that technology,” he said. “The demographics of the Egyptian market in light of the presence of a large segment of the Egyptian people under the age of 40 hints the presence of a promising future for these services.”
Saba also revealed a plan to acquire a fintech company under the Ebtikar platform, as one of its first deals of the current year.
Daily News Egypt learned that there are negotiations to acquire a company that owns financial leasing, factoring, and mortgage funding licenses. The deal’s value is about EGP 250m, the largest share of which belongs to the company Ebtikar.
Moreover, Saba said that the government’s policy is to promote this type of investment, which will give them a priority in the coming period. “Therefore, we are keen to look for all the opportunities in the financial technology sector, given the government’s interest in raising financial inclusion,” he added.
He noted that they established Ebtikar and applied to receive a license for microfinancing, for which the procedures are still ongoing. The company also acquired a majority stake in Bee for electronic payments.
Saba said that the capital of Bee was increased by EGP 50m, while Ebtikar aims to increase the subsidiary’s capital by EGP 40-50m in the first quarter of this year, followed by further capital increases to finance the working capital and increase the number of services through investing in the company’s technological infrastructure and points of sale. He noted that payments are made first to the service providers, then the cash is collected from clients.
He explained that funding comes from the two main shareholders of the company, adding that there is a plan to raise Ebtikar’s capital from EGP 65m to EGP 200m. Saba said that the current year will see a breakthrough in the mergers and acquisitions sector, as the exchange rate stabilises and macroeconomic indicators improve.
He said that the company is focused on its main role as a direct investment company, with a strategy of investing in companies for five to 10 years. “We are not a holding company or strategic investors to keep our investments forever,” he stressed.
On exiting Madinet Nasr for Housing & Development (MNHD) after 11 years from buying 22% of its shares, Saba said that MNHD moves them from one growth stage to another. “Our investments in the company at the end of 2006 focused on the potentials of the two land plots it owns with a total of 10m sqm. The company now has a chance to add land in western Cairo,” he added.
Saba explained that MNHD work scheme did not match the type of lands it owed, but the problem of obtaining licenses was a problem, as the lands were close to the airport. After receiving the permits, development began. “And with it, a new stage for the company emerged. We began with partnership residential projects, then new administrative and commercial ones,” he said.
He stressed that all the investments of the company are saleable, but evaluation is the main influencing factor in the decision to leave them or not. “The company does not fall in love with investments,” he emphasised.
Last month, MNHD presented a bid to obtain a plot of land in Sheikh Zayed on an area of 1,000 feddans, which will be funded through financial inflows of the company from sales of current projects.
Saba said that the company is exploring non-traditional funding mechanisms if they obtain the land. He added that the New Administrative Capital cannot be ignored, as the government’s and investors’ interest in it is encouraging investments.
In the same context, BPE is contributing to New Ismailia for Urban Development Company (IDRE), which aims to gentrify Downtown Cairo. He noted that the political turmoil following the revolution and the security vacuum hindered investments.
He explained that the company is now working on renovating four buildings in Downtown, out of 22 total buildings that the company has bought in previous years. He added that the company is in the last stage of developing a building on Champollion Street, next to the Cinema Radio building, Kodak corridor, and the French Consulate building.
Furthermore, Saba revealed the company’s plan to renovate more buildings in the current year, while maintaining their architectural forms, ultimately aiming to rent them out. The total investments IDRE is injecting for developments in 2018 is EGP 150m.
He noted that part of IDRE is expected to be listed on the EGX within two years, after renovating part of the buildings and leasing them.
In the energy sector, BPE owns 20% of Total Egypt, next to shares in renewable energy companies.
In addition, Saba said that the Abu Dhabi National Oil Company (ADNOC) offering was a positive sign for Total, where the company is now considering exiting the company in two years, as its objectives are quickly reached within five years.
BPE also seeks to add renewable energy stations to its investments portfolio in 2018, after acquiring three stations, through Infinity, which is owned by Mansour family, with a capacity reaching 130 MW.
Saba noted that the company is considering four investment opportunities in the current period. The first deal of this year is expected to be announced this month, through acquiring a company in the financial sector under the umbrella of Ebtikar, a company in the consumption sector worth EGP 450m, two solar power plants, and a pharmaceutical company.
BPE is also working to exit several ventures this year, such as Bio Pharma Egypt, especially after MedCap’s investment period concluded. The deal will be executed in the third quarter. Furthermore, the company will exit the Cairo Kidney Centre, through merging it with another entity before the end of the first half of 2018.
On his vision of economic conditions, he said he was optimistic that the Egyptian economy could attract more investments, but that interest rates should be cut to encourage investors.
He also called for the need to remove taxes on Egyptian treasury bills in light of the inflated market discount rates, which are used to estimate the rates of return required by foreign investors, make direct investments at appropriate returns, next to the existence of agreements to prevent double taxation, which means the presence of two discount rates, according to the nationality of investors.
Saba participated in establishing EFG Hermes, which he exited before establishing Beltone Financial Holding. He later exited it as well, in favour of the Act Financial – Orascom Telecom alliance, which has over 30 years of experience in the field of financial markets.