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Al-Ahram Weekly 16 - 22 December 1999 Issue No. 460 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 16 - 22 December 1999 Issue No. 460
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Debate Focus Profile Living Travel Sports People Time Out Chronicles Cartoons Letters New lease of life for flagship stores?
By Gamal Essam El-DinThe government's final go-ahead to the privatisation of five major state-owned department stores was postponed this week due to gaps between official valuations and the offers submitted. A new round of negotiations will be conducted between officials in the Public Enterprise Ministry (PEM) and the Central Auditing Agency (CAA) and local bidders in the hope of reaching a compromise on the selling price.
A final decision about offers was supposed to be announced at the beginning of November, but was delayed to allow bidders to submit plans on the upgrading and streamlining of the businesses. PEM also required time to commission foreign consultants with a proven record in running similar chains to assess the three cash offers.
Stores to be privatised include Omar Effendi, the Modern Fashion Company (Benzaion, Ades, Rivoli) and the Clothing and Consumer Products Company (Sednaoui), all affiliated to the Textile Manufacturing and Trade Holding Company, the Egyptian Products Sales Company and the Hannaux and Cicurel Stores, affiliated to the Spinning and Weaving Holding Company. The five companies have 351 branches and 194 warehouses throughout Egypt.
Grand old department stores, at the heart of a long-drawn out deal
photo: Mohamed Mos'ad
No sooner had the government given its final approval to privatisation than a group of local businessmen rushed to form a consortium -- The Industrialists of Egypt -- that made an LE338.2 million offer to buy a majority stake of 76 per cent in the companies. The joint-stock consortium has paid-up capital of LE500 million and includes fifty-five industrialists.
A second bid, submitted by Mohamed Geneidi, the Chairman of GMC group, thought to be in the region of LE150 million, seeks to purchase only three of the companies, Sednaoui, Benzaion and Hannaux. A third offer, by the Egyptian-Kuwaiti Holding Company, co-owned by the Kuwaiti El-Kharafi Group and Egypt's Commercial International Bank, submitted an LE152 million offer to buy 76 per cent of Omar Effendi's shares.
The second round of negotiations revealed the extent of the gap between official valuations and the offers submitted by the three bidders. In an attempt to reach a compromise, the two holding companies, of which the five stores are affiliates, excluded land assets from the sale transaction in an attempt to reduce the official selling price.
According to a memo submitted to Public Enterprise Minister Mokhtar Khattab, the valuation price for Omar Effendi is LE593 million. Minus land assets, this will be lowered to LE294.8 million, which still leaves a LE100 million gap between the asking price and the offer made by the Egyptian-Kuwaiti Holding Company. The two holding companies, in addition, are demanding that the costs of renovation and upgrading introduced in the last fiscal year should be calculated into the official price. These costs are estimated at LE40 million.
In an attempt to finalise the sale of the stores, Prime Minister Atef Ebeid has decided to form a special committee to review the valuation process. The committee includes the chairmen of the two holding companies, of which the stores are affiliates, two representatives of the Central Auditing Agency (CAA) and the Public Enterprise Office.
For their part local bidders have asked for the official valuations to be lowered to reflect the huge investments they will have to make to revitalise the retail operations of the stores. Local businessmen are depending on the support of the People's Assembly which recently issued a report cautioning against selling leading department stores to foreign investors "because it leads to a foreign monopoly over the local consumer products market".
Yet still the new round of negotiations is expected to see an upward revision of existing offers, while the holding companies will be asked, with the approval of the general assemblies and CAA, to lower the official price -- a process that is likely to continue until a compromise is reached.
The sale of department stores, when completed, will be the privatisation's programme's first foray into retail outlet divestiture.
