OCI, the parent company of Egypt’s Orascom Construction Industries, has received regulatory approval to buy out the shares of its Egyptian subsidiary, it announced in a statement.
Shareholders of the remaining 22.5 per cent currently listed in the local market will be able to receive OCI’s Amsterdam-listed shares, or alternatively £E255 a share, during a tender offer that ends on 28 July.
Orascom says it would not be delisting from the Cairo stock exchange, although many say that is likely to happen eventually.
The buyout follows a dispute with the Egyptian authorities. In March, chief executive officer Nassef Sawiris was banned from travelling as the government claimed the firm owed £E14bn ($2bn) in taxes from the sale of its cement operations to France’s Lafarge in 2007.
OCI reached an agreement with the Egyptian Tax Authority to settle the outstanding tax dispute at the end of April, agreeing to pay £E7.1bn in 10 installments until 2017.
Orascom Telecom, the second-largest listed company on the Egyptian stock exchange, is also looking to leave the bourse, which is currently experiencing low turnovers ahead of planned protests against President Mohamed Mursi.
Confidence is already low in Egypt due to continued political instability and the failure of the government to secure much-need international funds. Its budget deficit is widening and foreign reserves are running low, while foreign direct investment is drying up.
The delisting of major companies means that Egypt could become one of the lowest weighted countries on the MSCI Emerging Markets Index, which is used as a benchmark for fund managers worldwide.
US-headquartered index compiler MSCI said in its semi-yearly classification review in June that it could potentially downgrade Egypt in future, as investors may not be able to repatriate funds from Egypt due to foreign exchange shortage.
“In addition, this situation may also have a negative impact on the liquidity of the Egyptian equity market, which could trigger a review of the MSCI Egypt Index for potential reclassification to Frontier Market due to the lack of liquid investable stocks,” it said.