Saudi Arabia’s Public Investment Fund halts plan to acquire the United Bank of Egypt

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Reuters and Bloomberg have said that Saudi Arabia’s Public Investment Fund halted a plan to acquire the United Bank of Egypt, almost wholly owned by the Central Bank of Egypt, due to disagreements over its valuation. According to sources, the two parties disagreed on how to evaluate the bank due to the depreciation of the Egyptian pound. They explained that the Saudi Public Investment Fund wants to evaluate the United Bank of Egypt in Egyptian pounds, while the Egyptian government wants to consider it in US dollars.

Egypt devalued its local currency three times last year, placing Egyptian money as the third worst-performing currency. A financial analyst at an investment bank, who refused to be named, said that the halt in negotiations reflects the Saudi Public Investment Fund’s vision that the Egyptian pound will witness another decline. The halting of the deal comes in the context of successive stumbling blocks in the Egyptian government’s plan to sell state-owned companies.

The Egyptian government had said it intends to sell at least 32 state-owned companies in 2023. Among the companies are Banque du Caire, The United Bank, and the Egyptian government’s share in the Arab African International Bank. Wataniya Petroleum and Safi Waters, owned by the Egyptian Armed Forces, are also for sale. Asharq Business said the features of a comprehensive program to sell stakes in Egyptian state companies were beginning to unfold.

The news website identified companies expected to be listed on the Egyptian Stock Exchange during the year, including Sidi Kerir Petrochemicals, Egyptian Drilling, Middle East Oil Refinery, Engineering For The Petroleum And Process, Alexandria Mineral Oils, Egyptian Ethylene and Derivatives, Assiut Oil Refining. The list included about 12 companies in the petroleum sector. Local newspapers also quoted government sources saying Gulf investment funds are interested in buying shares in El-Nasr for Intermediate Chemicals.

An Enterprise report revealed an unprecedented wave of Gulf acquisitions of major companies in Egypt in 2022. It said mergers and acquisitions deals in Egypt more than doubled in 2022, as completed sales rose to 66, up from 31 in the previous year. Saudi Arabia and the UAE were involved in 40 deals in Egypt in 2022. According to Enterprise, banking and financial services have attracted the most deals, followed by industry and energy.

The influence of Gulf sovereign wealth funds has dramatically expanded in the Egyptian economy, and in addition to depositing ten billion dollars in the Central Bank of Egypt, the Abu Dhabi Investment Authority and the Saudi Public Investment Fund pumped about $3.1 billion to acquire stakes in powerful companies listed on the Egyptian Stock Exchange. The Qatar Investment Authority is considering spending $2.5 billion to buy Egyptian government-owned stakes in companies, including Vodafone Egypt. It also deposited one billion dollars with the Central Bank of Egypt as a temporary deposit.