Al Mal learned from informed sources that Sidi Kerir Petrochemical Company (SIDPEC) ‘s planned acquisition of Egyptian Ethylene and Derivatives Production Company (Ethydco) will create Egypt’s largest polyethylene specialist entity with a turnover ( value) approaches 15 billion fairy.
Sidi Kerir yesterday announced an invitation to its board of directors to consider the appointment of the investment bank “NI Capital” in order to study a proposal to acquire all the shares of Al-Masria for the production of ethylene using the mechanism of bag after evaluate the two sides.
The sources confirmed that “Sidi Kerir” does not currently have sufficient liquidity to carry out the transaction through the cash option due to the enormous size of the company “Ethydco”, which estimated its capital in the order of 675 million dollars. and therefore preferred the possibility of exchanging shares.
He pointed out that the two companies currently control the majority share of the polyethylene market in Egypt and their total production capacity after the acquisition will reach 800,000 tons of ethylene per year and 650,000 tons of polyethylene.
Interestingly, “ethylene” is the main raw material for the production of polyethylene and is also sold as an end product.
He explained that the process will achieve mutual benefits for the two parties to the agreement (SIDPEC – Ethydco), as the two companies will fall into a single entity, which will result in reduced production costs, increased market share and the improvement of the ability to negotiate prices on the domestic and foreign markets.
The sources confirmed that the expected agreement will allow the shareholders of “Ethydco” to dispose of their property more freely, which will be converted into shares of Sidi Kerir Company, which is listed on the stock exchange, allowing them to exit easily and at any time.
The operation will also increase the market value of Sidi Kerir in the stock market, as it will involve a capital increase process equivalent to its expected value, and therefore will increase the liquidity on the stock in general.
Appointment of an independent financial advisor to evaluate the two companies
Sources indicated that if the board of directors agrees to proceed with the transaction procedures, an independent financial advisor will be appointed to evaluate the two companies, in addition to appointing a legal advisor to manage the process.
In a related context, Hisham El-Shibiny, Director of the Research Department of “Mubasher” Securities Brokerage Company, said that “Ethydco” produced over 274,000 tons of ethylene and 280,000 tons of polyethylene in 2021.
He explained that the current market value of the company “Sidi Kerir”, according to the current price, is 4.69 billion pounds and the stock is currently trading at a profit multiplier of 4.77 times, noting that it is expected. a net profit of 987 million for the company in 2022.
“Mubasher” estimates the exchange rate between “1.8 and 2” shares of “SIDPEC” against 1 of “Al Masria”
He said that if the takeover is implemented, the trading factor is likely to reach 1.8-2 shares of “Sidi Kerir” against a stake of “Ethydco”.
Ethydco was founded in January 2011 with investments of approximately $ 1.9 billion and its ownership structure is divided between “Sidi Kerir” 20%, Petrochimico Holding Company 20%, Gasco 11%, National Bank of Egypt 21%, Banque Misr 10%, the National Investment Bank 14% and others.
The ownership structure of Sidi Kerir is divided between the Egyptian Petrochemical Holding at 20%, the Social Security Fund for public sector workers 19.2%, the Social Security Fund for public and private sector workers at 12.2%. %, Al Ahly Capital 6.9%, the National Investment Bank 6.9%, and also the Egyptian petrochemical company 6.9%, and the rest are stock-free.
