Orascom Construction Industries expects a transaction backed by Bill Gates for transferring the company’s shares into an Amsterdam-based unit to be concluded within four weeks, an executive said today.
OCI NV plans to absorb all local stock and global depositary receipts of Cairo-based Orascom Construction under a share-exchange offer that has attracted more than $2 billion in commitments from investors. Orascom Construction shares climbed as much as 3.7 percent to 277 Egyptian pounds before trading at 274.44 pounds as of 11:55 a.m. in Cairo. The company’s London-listed GDRs surged 4.7 percent to $41.85 on Jan. 18.
Gates’ Cascade Investment LLC joins Southeastern Asset Management and Davis Selected Advisers in what Orascom Construction said is the biggest foreign investment in Egypt since the 2011 uprising that ousted former President Hosni Mubarak. The listing on NYSE Euronext Amsterdam will help lower the company’s borrowing costs, Chief Executive Officer Nassef Sawiris said Jan. 18, after Standard & Poor’s cut Egypt’s credit rating to the same junk level as Greece.
“The first part of the transaction is an exchange offer of GDRs into Amsterdam-listed shares, and the second part is a tender offer to buy out the 25 percent local shares,”said Omar Darwazah, investor relations manager at Orascom Construction. “Both are expected to be complete in four weeks.”
The Sawiris family and Dubai-based Abraaj Group, which together own a majority of shares in Orascom Construction, have already submitted their GDRs for exchange. OCI NV will seek the approval of Egypt’s markets regulator today to submit a mandatory offer to exchange all of Orascom Construction’s Cairo-listed shares for either for stock in the Amsterdam-based unit or 280 Egyptian pounds each, Darwazah said.
“In four weeks, we will re-group and see where we are,” Darwazah said. “We might need to do a secondary tender offer, depending on how many shares are left unresponsive.” The stake which investors including Gates will hold in OCI NV would depend on how many local investors opt to exchange their shares for cash, he said.
The Egyptian economy has struggled to recover from the chaos that followed Mubarak’s ouster as foreign direct investments tumbled. The government is in talks with the International Monetary Fund for a $4.8 billion loan to help stem the decline in foreign-currency reserves.
Gross domestic product may expand 3 percent in the fiscal year that ends in June 2013, according to the median estimate of 11 economists on Bloomberg. The economy expanded about 5 percent in the year preceding the uprising.
Orascom Construction is Egypt’s biggest publicly traded company. After exchanging their GDRs for OCI NV shares, the Sawiris family and buyout firm Abraaj expect to maintain their holdings proportionate to their Orascom Construction stakes, according to a statement distributed by the Regulatory News Service Jan. 18.
OCI NV also plans to start a U.S. depository receipts program in New York. The company is “committed to an active listing in Egypt, either directly or through Egyptian depository receipts,” Sawiris said by phone Jan. 18. Egypt’s benchmark EGX 30 Index rose 0.6 percent today.
Orascom Construction is also “still committed” to a plan to split its construction and fertilizer businesses, Darwazah said. The company’s third-quarter net income declined 31 percent to $127 million after booking provisions linked to several projects.
“The transaction underpins genuine investor appetite to invest in Egypt,” said Sawiris. “Unlike local shareholders who monitor events on a daily basis, sophisticated investors see the evolution of democracy having a long-term positive impact on the economy.”
Allen & Co, Barclays Plc, Citigroup Inc. and Rabobank International acted as international advisers, while Cairo-based CI Capital Investment Banking was the exclusive local financial adviser, according to the RNS filing.
Michael Bennett, former CEO of Terra Industries, will serve as chairman of OCI NV. Jan Alberts Ter Wisch, former partner at Allen & Overy LLP, and Abraaj founder Arif Naqvi will act as non-executive independent directors. Sawiris and Salman Butt, Orascom Construction’s chief finance officer, will be executive directors.
“As you can see from the number of bankers and advisers, this has been a process that took quite a few months,” Sawiris said.