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on the block
time to be watchful
as 1998 dawns, egypt's privatization program is pausing to catch
its breath before forging ahead. the first month of the year will
witness few, if any, new offerings from the government. once ramadan
ends, however, the pace should quicken. unfortunately, predicting
which companies will be made available to the public remains more
difficult (and probably less accurate) than reading tarot cards.
the only sure thing is that privatization will continue, and that
is a major accomplishment in itself.
probably the most ambitious plan said to be on the agenda for 1998
is the privatization of one of the big four state-owned banks. the
rumor mill has the bank of alexandria as the most likely candidate,
but its sale remains far from certain. for starters, the legislative
framework that would allow the government to sell its stake in one
of the big four is not yet in place. even if that hurdle is overcome,
the government will have to decide which bank to sell, how large
a stake to sell, how to sell that stake and to whom to sell it.
should the ministerial privatization committee decide to sell a
substantial stake in one of the banks to a large international bank,
a great deal of effort would have to be made to clean up what is
presumably a questionable loan portfolio. a minority ipo or capital
increase on the exchange seems the most likely method of privatization,
but 1999 seems more likely than does 1998.
a company many investors are disappointed to see on the agenda for
1998 is misr aluminum, which was supposed to be sold countless times
in the third and fourth quarters of 1997. after being postponed
to avoid conflicting with the end-of-year holidays, misr aluminum
remains on hold for reasons that are somewhat murky. the company
is still likely to be the centerpiece of the privatization program
in the early part of 1998, and the timing of its sale will speak
volumes about the government's intentions for the rest of the year.
an early, successful offering could pave the way for a wave of new
offerings, while a later offering could mean several more months
of slow progress.
a number of companies appear likely to come through the pipeline
in early 1998, although details like when and how much remain a
mystery. ameriyah cement will have a gdr offering covering the government's
remaining 30 percent stake, most likely during the first quarter
of the year. el nobariya seeds, el wadi cotton ginning, nile pharmaceuticals
and sugar & integrated industries co. appear to be headed for
ipos on the exchange. abu zaabel fertilizers seems destined for
sale to an anchor investor, as does banque du caire's 51 percent
stake in cairo barclays banks.
on the whole, 1998 is unlikely to witness many dramatic new developments
on the privatization front. the government might find it difficult
to sell its holdings, because most of the high performers have already
been divested. nonetheless, commitment to the program remains intact,
and the government will continue to sell down its assets.
our advice for the coming year is to pay close attention to the
fundamentals of the companies offered. the days of can't-miss ipos
are drawing to a close, and investors need to be careful or they
will get burned. there are sure to be opportunities to make a profit,
though, so stay tuned.
eric winograd
a research analyst
intercapital securities
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