From the trading floor
Sherine Abdel-Razek, Tuesday 15 Sep 2020

Telecom Egypt (TE): The state-owned fixed-line monopoly seems to be serious about acquiring the 55 per cent it does not own in the mobile operator Vodafone Egypt (VE).

A consortium of banks is currently in negotiations with TE to finance the acquisition, according to the financial daily Al-Borsa. TE has already hired the banks EFG Hermes and Citibank as advisors on the deal, and an agreement between TE and Vodafone UK, VE’s parent company, gives TE, which already owns 44.6 per cent of VE, the right to counter any offer to buy the remaining shares in VE by submitting an offer itself.

This comes as the memorandum of understanding (MoU) between the Saudi telecoms giant STC and Vodafone UK expired without a deal because of disagreements between the parties. It is believed that the disagreements emerged from STC asking to lower its initial $2.39 billion offer, as it had come under financial pressures due to the spread of the coronavirus and a decline in oil prices. However, Vodafone said in a statement it would continue negotiations with STC, done according to due diligence, in order to finalise a deal in the near future.

The MoU between STC and Vodafone was initially signed in January and was extended for 90 days in April followed by another 60 days in mid-July due to the pandemic. One of the major problems that might face STC if it reaches an agreement to buy the 55 per cent stake is the rumour that the Egyptian Financial Regulatory Authority (EFSA) might ask STC to submit a mandatory offer to buy the 45 per cent stake that Telecom Egypt currently holds.

Market analysts have previously ruled out TE’s submitting an offer, as it already has a huge debt burden of LE17 billion. Vodafone sources have also said that the company does not believe TE will move forward with a counter-offer and thinks it more likely to sell its stake given its current debt position. But the local press also quoted sources as saying that TE would reschedule existing obligations to prepare itself for a potential acquisition of the 55 per cent stake.

Orascom Investment Holding (OIH): The spin-off resulting from the horizontal demerger of activities in the group founded and owned by business tycoon Naguib Sawiris is considering partnering with the Sovereign Fund of Egypt (SFE), though the nature of any such partnership has yet to be revealed.

The news comes immediately after the SFE announced the establishment of four sub-funds to invest in healthcare, financial services, tourism and real estate, and infrastructure. OIH last week got the Financial Regulatory Authority (FRA) approval of the horizontal demerger in order to separate its financial-services activities under Orascom Financial Holding (OFH) and in the other sectors concerned into another entity also called OIH. This will remain listed on the Egyptian stock exchange with an authorised capital of LE2.5 billion.

OFH now controls OIH’s financial operations, including a 74.5 per cent stake in local investment bank Beltone Financial and 29 per cent in Sarwa Capital. It will be covering investments in eight subsidiaries. Beltone Financial is currently eyeing Blom Bank Egypt for acquisition, with the embattled Lebanese bank earlier announcing that it was seeking to sell its Egyptian assets, as its home country was suffering its worst economic crisis in decades.

Cleopatra Hospital Group (CHG): The medical-sector investor has bought a 60 per cent stake in Bedaya Hospital, with a statement released by the CHG saying it would be paying LE105 million for the hospital’s medical equipment, working capital, and associated real-estate assets.

According to the online news outlet Enterprise, the transaction is the first major consolidation in the field of in-vitro fertilisation (IVF) in Egypt, which mostly consists of smaller clinics. Covering an area of 4,500 square metres, the Bedaya Hospital is a medical facility with three operating theatres, 19 recovery beds, and an embryo lab. It specialises in fertility and IVF treatments and is expected to contribute some 10 per cent to CHG’s consolidated earnings before interest, taxes, depreciation, and amortisation (EBITDA).

On Monday, the group reported a 67 per cent decline in its net profits in the second quarter of 2020 to LE14 million as compared to the same period the previous year. The decline was attributed to a worsening economic situation resulting from the outbreak of Covid-19 coinciding with the holy month of Ramadan, which caused significant operational challenges and a sharp decline in patient volumes, Cleopatra CEO Ahmed Ezzeddin said in a statement.

*A version of this article appears in print in the 17 September, 2020 edition ofAl-Ahram Weekly