MCQ shares up 30 percent in one week on rumors of possible offer
CAIRO: Spain-based Cimpor Inversiones SA announced late Sunday it is looking to buy 100 percent of Misr Cement Qena (MCQ) in a deal that could surpass LE 2 billion. Cimpor s offer was posted on the Cairo and Alexandria Stock Exchange website and in local newspapers, and is valid for one week.
According to Cimpor s terms, the company has the right to retract its offer if at least 50 percent of MCQ s shares are not offered for sale. Public institutions, including the National Bank of Egypt, National Investment Bank, and Misr Insurance, own 41 percent of MCQ, with the rest of shares divided among private institutions and retail investors.
In mid-day trading Monday, MCQ was up almost 2.5 percent on the news to LE 65.12. The stock has appreciated by nearly 30 percent since last Tuesday on rumors of Cimpor s imminent announcement.
If executed, the deal would give Cimpor control over MCQ s 1.4 million ton annual production capacity, 3 percent local market share, and the company s corporate tax exemption agreement with the government valid through 2012. In late 2006, MCQ also announced plans to add new production facilities with investments of LE 600 million.
The planned upgrades are expected to be operational in late 2008, increasing the company s annual capacity by 1.5 million tons.
But while Cimpor s offer might benefit the Ministry of Investment s (MOI) privatization program and help public banks reduce their shares in non-financial enterprises, it fuels public fear of more price hikes in the sector as the government continues to lose its long-held grip.
What s happening now is you have multinationals that are control of the market, HC Brokerage Cement Sector Analyst Ahmed Badr told The Daily Star Egypt. Before, the government used to be in control so it could set the price. Now multinationals are running the market so why can t they raise prices?
Despite several attempts by the Ministry of Trade and Industry to cap cement prices in the second half of 2006 after significant price increases, companies continued to violate the LE 290 per ton ex-factory limit. Cement prices stood at just over LE 200 per ton in late 2005 before spiking to LE 390 per ton in Q1 2006.
Other analysts suggest the possible sale of MCQ paves the way for the government s rumored plans to privatize the largest remaining public cement producer, the National Cement Company (NCC), with more than 3 million tons of annual output and 9 percent market share.
MOI denied on several occasions any government intentions to sell NCC, but a Chemical Industries Holding Company (CIHC) official confirmed NCC will be offered for sale in 2007. NCC is a direct subsidiary ofCIHC.
Egypt is the largest Arab and African cement producer with nearly 40 million tons in annual output. According to MCQ s 9M 2006 results, the company recorded LE 203 million in net income on 423 in total revenues, figures up 69 percent and 26 percent, respectively.