Egypt initial public offering activity picks up pace

12 March 2014

Major offerings expected in second half of 2014

Initial public offering (IPO) activity in Egypt is picking up pace as a succession of companies seeks listings.

Arabian Cement Company, which is looking to sell 22.5 per cent to 40 per cent of its shares to the public, is set to mark the country’s second offering, following a two-year hiatus. The market got back into action in January, when Misr National Steel (Ataqa) sold 10 per cent of its shares for £E260m ($36.4m).

The cement firm’s offering is expected to be concluded by the end of the second quarter of 2014, Ahmed el-Guindy, head of investment banking at Cairo-based investment bank EFG Hermes, tells MEED.

EFG Hermes is currently working on launching IPOs for three to four companies seeking listings on the Egyptian Exchange, says El-Guindy.

In October 2013, National Automotive Company (Natco), the distributor of Mercedes Benz in Egypt, also announced plans to sell 10 per cent of its share capital.

While many of the planned offerings are modest in size, that could change towards the end of the year, says another Egypt-based banker.

The development of the Suez Canal corridor may involve a flotation as the government could choose to sell shares in either subsidiaries of the project company or a holding in the project company, according to the source.

In January, 14 consortiums qualified for the massive scheme, which is aimed at creating infrastructure around the Suez Canal, the shipping route between Europe and Asia that brings in billions of dollars in revenue every day. Plans include the development of four seaports, a logistics centre and an industrial zone.

“We’re expecting major IPOs following the presidential election and formation of a government,” the source says. “They will be targeting investors from the UAE, Saudi Arabia and Kuwait.

“We could also see major reforms to the capital markets. While the president of the exchange is already undertaking some reforms, there is no clear charter yet.”

The Egyptian government recently relaxed listing regulation, allowing loss-making firms to list as long as certain conditions are met. That could lead to share offerings from more companies related to long-term infrastructure projects, which tend to require large investment before being able to deliver returns.

The increased IPO activity comes at a time of strong performance by Egypt’s stock market. Confidence in the country’s economy has steadily increased in the run-up to the presidential elections, with the benchmark index, the EGX 30, rising 19.6 per cent year-to-date.

If Field Marshall Abdul Fattah el-Sisi is elected president, he is expected to strengthen ties between Egypt and the UAE, Saudi Arabia and Kuwait, which have sent billions of dollars in aid to the interim government. Further investment could help the country build up its foreign currency reserves and revive its economy.

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