x Abu Dhabi, UAEWednesday 17 January 2018

Egypt awaits the bargain hunters

Egypt's top companies are likely to be acquisition targets when Cairo's stock exchange finally reopens.

Hisham Ezz al Arab, the chairman and managing director of Commercial International Bank, says bankers will soon be eyeing Egypt firms.Dana Smillie for The National
Hisham Ezz al Arab, the chairman and managing director of Commercial International Bank, says bankers will soon be eyeing Egypt firms.Dana Smillie for The National

CAIRO // The steep decline in share prices of Egyptian companies traded on foreign exchanges and the drops that are expected when the Egyptian Exchange, reopens will make the country's top companies acquisition targets, says the head of Egypt's largest bank.

Hisham Ezz al Arab, the chairman and managing director of Commercial International Bank,said investment bankers would soon begin circling Egypt's companies.

"Generally companies will be too cheap," he said in an interview in his Cairo office. "The business environment in Egypt has changed and will change … That makes it very much a good, healthy business environment. If I'm sitting at one of the international corporates, I would definitely and seriously look for targets."

Mr al Arab's own company, traded on the London Stock Exchange, has seen its shares drop by nearly 40 per cent for the year on the back of the popular uprising that toppled Hosni Mubarak's 30-year regime and left international investors wondering what comes next for one of the key economies in the region.

The situation highlights the disparity between the fundamental economic drivers of the country - a growing population, natural resources and a prime geographic location - and the sudden loss of faith in the economy.

Mr al Arab said he recognised the uprising would have a major impact on business. He expects no new loans to be issued until at least mid-May, the earliest possible opportunity to elect a new president.

Meanwhile, existing clients will have trouble paying because their cash flows have dried up. It's a period of "stagnation" that could easily continue into next year, but in the long run the country should be better positioned to improve its role in the global economy, he said.

"A year in a history of a country is nothing," he added.

Behind his desk is a recently acquired photograph of Karl Marx. Mr al Arab said he placed it next to a small Egyptian flag to explain to people that the country was about to build a real democracy, which meant citizens would have to vote for their beliefs.

He said he explained to his employees that their job was not only to be bankers, but to explain to customers and their communities "what a democracy is".

"To me it is three things," Mr al Arab said. "Listen and listen well because dictators don't listen. Respect the majority. If it's 41 versus 40, you have to respect the 41 majority, which leads me to my third point. Your vote counts. If someone is to blame, you don't blame the people you elected, you blame yourself for not doing your homework when you elected them. Blame no one but yourself."

While he did not believe Egypt would go down the socialism route, the Marx picture signified the opportunity the people of the country had to elect whichever representatives they wanted.

The rising political forces have called for a "transparent, level playing field" in the country's business world, as well as political freedom. But one of the greatest risks in Egypt today was if the acting authorities go on a witch-hunt against businessmen and hurt the private sector as a whole, Mr al Arab said.

"I'm not defending them [businessmen who made improper deals] because there were mistakes that happened, but how do you expect to have a fair trial if a judge is sitting inside a court and there are 50,000 people outside standing and screaming," he said. "Then it's not a trial after the uprising, it's a revolutionary trial, taking revenge."

The uprising, Mr al Arab said, was a better resolution to the country's growing discontent than to let matters stew inside for years longer.

Egypt was "like a bottle of champagne that you keep shaking for 60 years and you keep shaking hard for the last five years", he said. "Two things could have happened: what we're going through right now, which is the cork comes out and you wet the carpet, or the bottle explodes and the glass hits everyone."