After selling an 85 per cent stake in the heavily indebted Omar Effendi chain to Egyptian investor Yassin Aglan, the previous owner, Saudi Anwal United Trading Company, said the old administration will not fulfill its commitments to the chain’s staff starting February.
Questions have emerged regarding the fate of the workers, debt payment, and the approval of the government, which holds a ten per cent stake in the company.
“Employees should not worry, we will cover salaries until the end of January,” Ahmed Nasr, a legal advisor to Anwal United, told Ahram Online.
"We have already paid them their December salary. After January their fate will be in the hands of the new owner,” he added.
A month after a failed attempt to sell Omar Effendi to the Arab Investment Development Company (AID), Yassin Aglan, chairman of the Misr Food Company, stepped in offering to buy the chain from the Saudi owner, which drowned it in financial distress. The offer was LE220m ($37.9m) – less than half the price Anwal paid the government back in 2006, when it took over the privatized department stores.
The government was surprised to learn about the Aglan-Anwal transaction. “We knew (about the deal) from the newspapers,” the chairman of the public holding company which owns 10 per cent of Anwal, said just four days ago.
“I don't worry about the National Company of Construction and Development (the public holding company) because it only owns ten per cent in Omar Effendi,” said Nasr.
The government had previously welcomed AID’s offer to buy Omar Effendi, but the transaction failed after the buyer completed the due diligence process.
“We learned from AID’s mistakes,” Tarek Abdel Aziz, legal advisor to Aglan, told Ahram Online by phone.
“Now we are liable for our employees, there will be no lay-offs,” he says, adding that “wages will rise,” too.
The administration board of the new owner El-Aseel, Aglan’s company, plans to expand, opening new branches and adding jobs.
“We made a better economic evaluation of the chain, we avoided the previous offer’s mistakes, raising the probability of success,” Abdel Azis said.
The new owner will assume financial obligations, including bank loans and dues owed to suppliers and workers, and tax arrears worth LE635m ($109m).
Last December, a bankruptcy petition was been filed against the iconic chain because of its inability to pay a LE100,000 bill ($17,249), rendered for an order made with a small furniture company, a source said.
The bankruptcy petition is the third crisis the company has faced in less than one month.
Just one week earlier, workers in the stores led a successful strike, urging the administration to pay their salaries. And two weeks before that, AID’s acquisition of Omar Effendi fell apart after the Tax Authority seized control of the company's bank accounts in order to collect some LE98m ($17.5m) in unpaid taxes owed since 2007, when the store was privatized.
Omar Effendi was a public 'underdog' chain until 2006, when it was sold to Saudi Anwal. The company has only seen losses since and is still heavily in debt.