How will Sidi Kerir’s acquisition of ETHYDCO be affected by Abu Dhabi deal?

Daily News Egypt
4 Min Read

The capital market is waiting for the outcome of the acquisition deal between Sidi Kerir Petrochemicals Company and the Egyptian Ethylene Production Company (ETHYDCO), which was supposed to be finalized in the third quarter of 2023. The deal was delayed by the Abu Dhabi Development Holding Company’s purchase of 30% of ETHYDCO, which was approved by the Cabinet.

On September 21, the Board of Directors of Sidi Kerir Petrochemical Company decided to postpone the acquisition of ETHYDCO until the completion of the deal for Abu Dhabi Holding to buy a stake in the latter, which happened early last week.

Last Monday, Abu Dhabi Holding Company – the sovereign arm of the UAE, signed final contracts with the Sovereign Fund of Egypt to acquire shares in three government companies in the pre-IPO Fund portfolio, namely ETHYDCO, the National Drilling Company (NDC), and ELAB, for a total of $800m.

According to informed sources, the office of Matouk Bassiouny and Hennawy was the legal advisor for the buyer. The Sovereign Fund of Egypt was represented in the deal by the office of Baker & McKenzie.

The market is currently looking forward to the fate of the merger deal between the two entities, as informed sources told DNE. The deal will proceed normally, provided that Abu Dhabi Holding’s stake in ETHYDCO will be transferred to the new entity that will result from the merger of the two companies according to the agreed-upon swap factor.

Sources have previously revealed to DNE that the stock swap factor is about 1.4 shares of “Sidpec” for every share of “ETHYDCO”, which is awaiting the approval of the Financial Regulatory Authority (FRA).

The fair value of Sidi Kerir at the end of December 2022 was about EGP 23.13bn distributed over 756 million shares, with an average fair value per share of EGP 30.6, according to the financial advisor’s report prepared by Baker Tilly Consulting.

The fair value of EHTYDCO at the end of the same period was $1.08bn, distributed in 13.86 million shares, with an average fair value per share of $78.32.

The exchange rate to determine the swap factor was calculated based on EGP 30.9 to the dollar, making the fair value of ETHYDCO at the end of last December about EGP 33.54bn.

Sources explained to Al Borsa that, according to the swap factor, shareholders’ stakes in the two entities will be converted into stakes in the merged entity, each according to their shares. This also applies to Abu Dhabi Holding’s stake in ETHYDCO, which will be transferred to the merged entity based on the swap factor.

The ownership structure of ETHYDCO is distributed as follows: 20% for the Petrochemical Holding Company, 20% for “Sidi Kerir”, 11% for GASCO, 21% for Al-Ahly Capital Company, 10% for Banque Misr, and 4% for “Nasser Bank”.

Sidpec’s ownership structure is distributed as follows: 23% for freely traded shares, 20% for the Petrochemical Holding Company, 19% for the Social Insurance Fund in the government sector, 12% for the Public Sector Workers Fund, 7% for Al Ahly Capital Company, and the same percentage for the National Investment Bank. The remaining percentages are distributed among several other parties.

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