“The two parties of the deal are sure that governmental agencies insisted on not passing it, as well as refusing to extend the period of the acquisition deal,” said Beltone Financial’s legal adviser Ashraf El-Ibrachy, who is the main partner in Ibrachy & Partner.
El-Ibrachy told Daily News Egypt that the Commercial International Bank (CIB) was the one to suggest not extending the period of Beltone’s deal to acquire CI Capital. The suggestion was welcomed by Beltone, which is affiliated to Orascom Telecom Media and Technology (OTMT).
He added that both Beltone and CI Capital are aware of the importance of concluding the deal in order to create a large regional investment entity, which is why they extended the deal more than five times with the hope that government agencies would change their stances on the deal, and the hope is still there.
In a report by Beltone on Thursday, it stressed that it has agreed with the CIB to reopen the file on the deal once all obstacles hindering it are removed.
El-Ibrachy noted that since the beginning of the deal, many signs of intransigence by the state were clear in terms of implementing the deal. They started with the National Bank of Egypt (NBE) competing for the acquisition of CI Capital before it retreated. Then, the Central Bank of Egypt (CBE) governor, Tarek Amer, made some remarks wondering about the experience of the acquisition party, OTMT, and the value that will be added once the acquisition of CI Capital is concluded, saying that it is a matter of experience rather than buying and selling.
Amer said during his interview with presenter Lamis El-Hadidy that he never requested that the NBE make an offer to buy CI Capital, but it was the bank’s chairperson who suggested it which was met with encouragement from Amer’s side. However, the issue is not related to the CBE’s decision, as the CBE’s sole role is to supervise the banks’ general plans without intervening in these plans.
The CBE then made a decision to set controls for the financing of acquisition deals with loans in order to hinder the deal. One of the controls, for example, is not to finance more than 50% of the deal through loans, according to El-Ibrachy.
The controls also included reducing any financing for acquisition purposes, from 5% to 2.5% of the bank’s total loan portfolio. The financing rate for a single client and all parties related to him is to not exceed 0.5% of the bank’s total loan portfolio instead of 20% of total financing for financing purposes of 5%. Which means that the single client and all parties related to him can only obtain 1% of total bank’s loan portfolio.
Naguib Sawiris wrote an article in Al-Akhbar newspaper on 26 March, in which he said the NBE made the offer to acquire CI Capital with encouragement from the governor of the CBE. The NBE then cancelled the offer following a complaint by Sawiris.
Sawiris said he was surprised that the governmental bank, Banque Misr, had retreated from financing OTMT’s deal to buy CI Capital based on instructions from the CBE, then the same process was repeated with some private banks.
He noted that he had decided to conclude the entire deal without loans, however, during his meeting with the head of the Egyptian Financial Supervisory Authority (EFSA), and after completing the deal’s papers in order to obtain approval for it, he was surprised to learn that National Security had notified EFSA’s head to not issue the approval until it is reviewed.
El-Ibrachy stressed that since that date, the EFSA has looked for several other reasons to hinder the deal, including highlighting the violation of the main shareholder, businessman Naguib Sawiris, which goes back to 2012, even though OTMT had obtained Beltone a few months ago without the violation getting in the way.
He explained that it was emphasised more than once that if there was a violation, it is related to the main shareholder of the mother company OTMT, not the one affiliated to Beltone, thus the violation should not hinder the implementation of the deal. If that were the case, most of the company’s operations would be hindered as well if supervisory authorities dealt with the company that way.
The EFSA said that the violation is due to Sawiris pledging that Weather Investment would keep 51% of OTMT, however, ownership was transferred to OTMT Acquisition, which required the authority’s approval to provide an exception from making a compulsory purchase offer to conduct a restructuring within a single group, according to the provisions of Article 356 in the second chapter of the regulations for law 95/1992.
El-Ibrachy explained that afterwards, another obstacle emerged when the EFSA required that all parties wait for the verdict from the Court of Review in a lawsuit filed by shareholders in CI Capital in terms of the CIB’s obtainment of the company eight years ago. This was followed by the prime minister’s announcement that there is work underway to prepare new rules in order to prevent any party from controlling capital market trades.
The EFSA said in an official report that it had postponed Beltone’s deal to acquire CI Capital until completing the settlement on the main shareholder’s violation, head of the authority Sherif Samy said.
Samy explained that postponing Beltone’s obtainment of CI Capital does not mean postponing any future deals due to the main shareholder’s violation, instead each deal will be considered separately.
He pointed out that the same situation applies to OTMT, owner of Beltone, where the main shareholder’s violation will not hinder any acquisition or merging deals.
On that basis, Samy said the EFSA is waiting for Beltone to submit its documentation to acquire Arab Finance and Reefy for Microenterprises without any preset stances against them.
The legal adviser commented on Beltone’s stance by examining every Beltone deal separately and saying that the EFSA’s stance is logical because it acts as an economic entity rather than a legal one, and hence, it makes its decisions based on the integration with the trends of governmental agencies and the investment environment.
He added that the EFSA will respect any deals or other operations that the state deems crucial for economic interests.
El-Ibrachy stressed that the CIB will repay the value of the guarantee obtained from Beltone worth EGP 50m, because the amount is considered as proof of Beltone’s seriousness in concluding the deal, and the CIB will only obtain the interests of the amount in May.
Commenting on the failure of the deal, Mohamed Maher, head of Prime Holding, said that the EFSA’s situation in the deal is not sound because it should have distinguished between the violation of the main shareholder and the company’s acquisition deal, as that only resulted in hindering the deal for reasons that are not even related to the two parties of the deal, but rather a third party, represented in Naguib Sawiris.
He added that the EFSA’s remarks about Sawiris’s violation not impacting any future deals of Beltone or OTMT is “not logical” because the main reason why the deal was hindered is Sawiris’s violation, and in case the violation was not removed, the future deals will also be hindered.
Maher believes that the capital market will be impacted by not implementing the deal, especially after the increase in Beltone throughout the past period. Also, the capital market was awaiting a significant development in the sector.
Ayman Abo Hend, head of the direct investment sector in Cartel Capital, said the many events the deal witnessed predicated its failure.
He expects the impact of the deal’s failure on the capital market will be limited to the two sessions of Sunday and Monday, whereas the most negative impact will be on the way foreign investors view the investment climate in Egypt due to the state’s stance against specific companies.