CAIRO: The Ministry of Investment (MOI) announced Tuesday it has set the price of a 50 percent stake in Alexandria Mineral Oils Company (Amoc) at LE 3.9 billion, or LE 95 per share for the 43 million shares offered.
According to a statement posted on MOI’s website, the price was set by an independent valuation committee and verified by MOI officials. The announcement signals MOI’s retreat on its original strategy to sell the Amoc stake through an auction.
Amoc was first put up for privatization in October, 2005 when its 20 percent stake offering on the Cairo and Alexandria Stock Exchange (Case) drew 27 times the number of shares offered. Alexandria for Petroleum, The National Bank of Egypt (NBE) and Banque Misr remain the largest shareholders with 20 percent, 18.8 percent and 14.3 percent, respectively.
In May, MOI authorized NBE to sell a 50 percent stake in Amoc, representing the remaining government-owned stake, as part of the Central Bank s plan to reduce the involvement of the public banking sector in non-financial sectors. Thirteen companies initially showed interest, but just five conducted due-diligence exercises, including Citadel Capital and Waleed Bin Talaal s Aziziya.
No formal offers have yet been received, an MOI official said, declining to comment on possible reasons.
Despite the initial excitement over the Amoc offering in 2005, analysts now point out the company’s share price is too high for strategic investors. AMOC entered the CASE at LE 45 per share and rose to near LE 90 on the first day of trading before stabilizing in the LE 70 to LE 80 range in the following weeks.
Shares have gained as much as 20 percent since MOI’s private placement announcement, rising from LE 72 in mid-May to near LE 90 by the end of September, before leveling off near their current LE 80 level. At mid-day trading Tuesday, the company’s shares traded at LE 80.89, up almost two percent on MOI’s valuation announcement from Monday’s closing price.
Despite the reaction of retail investors to the valuation, it remains highly unlikely strategic investors will be moved, one oil and gas sector expert told The Daily Star Egypt. Even without the formal announcement of an asking price, the government found difficulty in drawing offers in October because most investors viewed LE 80 as too high, especially considering the number of shares offered, he said. Profitability and the potential for growth do not pose great risks, he added.
According to Amoc’s released financial results for Q1 2007, net income rose by 28.7 percent from LE 180.5 million to LE 232.3 million compared with the same period the previous year. In June, the company reported year-end results showing a 52 percent increase in 2005/2006 revenues to LE 4 billion from LE 2.7 billion in the previous year. Net income jumped in 2006 to LE 796 million from LE 518 million in 2005.
Despite raising the country’s privatization revenues to $6.1 billion (LE 34.8 billion) in 2005-06 from $3.9 billion (LE 22.3 billion) the previous year and just $400 million (LE 2.3 billion) in 2003-04, MOI’s struggle with AMOC was one of two major disappointments in 2006.
In February 2006 MOI was forced to abandon its attempt to float 18.6 million shares of Misr for Aluminum, representing a 17 percent stake in the company after public demand reached just 180,000 shares. The ministry blamed inappropriate market conditions at the time, referring to the correction witnessed by the case from February to May, while most analysts pointed to the inflated asking price of LE 54 relative to the LE 46 already floated shares traded at.