Amendment to Prime Minister’s 2018

On 28 February 2019, a decision[1] was issued amending Prime Minister’s Decision No. 926 of 2018 on the reregulation of the government’s program for the divestiture of state-owned company shares (“Decision 926/2018”).[2] Decision 926/2018 that came out in May last year contained rules and procedures for the government’s privatization program amid talks of the enforcement of a new privatization scheme following years of suspension. It assigned to a ministerial committee that is headed by the Prime Minister the task of supervising and implementing the privatization program, including identifying the companies and the stakes to be offered. Contrary to circulated news around this recent amendment, it actually slightly changes the definition of listed active shares that was contained in Decision 926/2018 by referring said definition entirely to the standards and conditions of activity that are applied by the Egyptian Stock Exchange.

Background

Despite the issuance of Decision 926/2018, the privatization program did not really take off except very recently in February when Eastern Tobacco piloted the stake sale program. This was attributed to stagnation in emerging and international markets which led to a postponement of the privatization program. The government has been hoping to kick-off the sale of its stake in a number of public entities as part of its efforts to increase public revenue and reduce the budget deficit. In a recent announcement, the Minister of Public Enterprise Sector said the government is planning to offer the shares of four more companies in 2019 as part of the share-sale program.[3]

Offering Procedure and Valuation

Of the important provisions of Decision 926/2018, was the setting out of the offering procedure which starts with the ministerial committee’s decision identifying the company and the stake to be sold, to the valuation of the shares according to fair value and the confirmation of said fair value by a special Ministry of Finance committee, to enforcing the sale, and depositing revenue in the seller’s account. Decision 926/2018 also specifically set out the manner for the valuation of shares that will be subject to sale in its Article (9). It stated that for listed shares that are actively traded, the upper and lower price range will be within 10% (above or below) the average closing price in the month preceding the announcement of the investment bank who will undertake the offering promotion. As for unlisted and inactive shares, the offering price is to be based on the financial advisor’s report that is reviewed and ratified by the aforementioned special committee. Prime Minister Decision No. 553 of 2019 amends Article (9) of Decision 926/2018 by providing that if the shares subject to offering are owned by more than one entity, said owners may delegate one of them to act on behalf of the rest in completing the sale procedures. In addition, the amendment refers the matter of determining what is meant by listed active shares to the standards and conditions applied by the Egyptian Stock Exchange, whereas Decision 926/2018 had an addition to this definition which also considered companies to have listed and active shares if the company had previously offered 20% or more of its share capital for trading.   [1] Prime Ministerial Decree No. 553/2019 amending certain provisions of Prime Ministerial Decree No. 926/2018 on the new regulations for the government’s program of offering state-owned company shares or expanding the equity structure in said companies, Official Gazette, Issue No. 9 (cont.), 28 February 2019. [2] Prime Ministerial Decree No. 926/2018 on the new regulations for the government’s program of offering state-owned company shares or expanding the equity structure in said companies, Official Gazette, Issue No. 19 (bis) (c), 14 May 2018. [3] HAPI JOURNAL, “Minister of Public Enterprise Sector: 4 initial offerings in the second batch of the program”, available through this link (in Arabic).