Egypt considers offering majority stake in more public firms

Egypt is considering adding more companies to the list of state-run firms in which investors can secure majority stakes as it readies to launch a programme aimed at reviving the battered public sector.

The government is planning to start with the sale of Heliopolis Housing and Eastern Tobacco in October, Public Enterprise Minister Hisham Tawfik said in an interview. So far, however, a majority offering is available only in Heliopolis, with 40 percent of the property developer to remain under state control.

“Our target is to improve the companies’ performance and to allow private sector participation in their boards,” Tawfik said, adding that this could come through “giving investors stakes in these companies and allowing them to have majority ownership in some of them.”

Egypt’s public sector has long been criticized as bloated and inefficient and officials have struggled to push the firms toward profitability.

The current programme marks a first step toward attempting to strike a balance between efficiency, profitability and raising revenue for the government. The other three companies on offer in the first stage are Abou Kir Fertilizers, Alexandria Container & Cargo Handling and Alexandria Mineral Oils Co. Egypt is hoping to secure 30 billion pounds ($1.7 billion) from the first stage and 100 billion pounds from the offerings overall.

Alexandria Container and Eastern Tobacco, the country’s largest cigarette maker, will undergo 1-to-10 stock splits before being offered, Tawfik said.

The timeline for the first-phase offerings, according to Tawfik, is the following:

Expected timing Company Expected percentage to be offered Government’s remaining stake
October Heliopolis Housing 33% 40%
October Eastern Tobacco 4.5% 50.5%
November Alexandria Mineral Oils Co 20% 51%
November Alexandria Container & Cargo Handling 30% 65%
December Abou Kir Fertilizers 30% 61%

The second portion of the 23 companies is expected to go on offer in the first quarter of 2019, Tawfik said, although officials have yet to decide on which firms or the sizes of stakes to be sold.

In the next nine months, the government will study the performance of the 121 public-sector companies that his ministry oversees.

“Strategic investors will be invited in, through management contracts,” to run some of the companies that are unlikely to turn a profit under their current leaderships, he said.

Source: Bloomberg