Al Mal has learned from informed sources that the expected acquisition by Sidi Kerir Petrochemical Company (SIDPEC) of the Egyptian Ethylene and Derivatives Production Company (Ethydco) will create the largest entity specialized in the production of polyethylene in Egypt with a business volume (establishment value) approaching 15 billion. fairy.
Yesterday, Sidi Kerir announced an invitation to its board of directors to consider appointing the investment bank “NI Capital” for the purpose of studying a proposal to acquire all of the shares of Al-Masria for the production of ethylene using the stock exchange mechanism after evaluating the two parties.
The sources confirmed that “Sidi Kerir” does not currently have sufficient liquidity to implement the deal through the cash option due to the huge size of the “Ethydco” company, which estimated its capital in the range of 675 million dollars, and therefore preferred the option of exchanging shares.
She 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 annually and 650,000 tons of polyethylene.
It is noteworthy that “ethylene” is the main raw material for the production of polyethylene, and it is also sold as a final product.
She explained that the process will achieve mutual benefit for the two parties to the deal (SIDPEC – Ethydco), as the two companies will fall under one entity, which will result in reducing production costs, increasing market share, and enhancing the ability to negotiate pricing in the domestic and foreign markets.
The sources confirmed that the expected deal will allow “Ethydco” shareholders to dispose more freely of their ownership, which will be converted into shares in Sidi Kerir Company, which is listed on the stock exchange, allowing them to exit easily and at any time.
The deal will also raise the market value of Sidi Kerir in the stock market, as it will entail a capital increase process equivalent to its expected value, and thus enhance liquidity on the stock in general.
Appointing an independent financial advisor to evaluate the two companies
The 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 Research Department at Mubasher Securities Brokerage Company, said that Ethydco produced more than 274,000 tons of ethylene and 280,000 tons of polyethylene in 2021.
He explained that the current market value of “Sidi Kerir” company, according to the current price, is 4.69 billion pounds, and the stock is currently trading at a profit multiplier of 4.77 times, indicating that a net profit of 987 million is expected for the company in 2022.
“Mubasher” estimates the exchange coefficient between “1.8 and 2” shares of “SIDPEC” against 1 of “Al Masria”
He said that if the acquisition is implemented, it is likely that the swap factor will reach 1.8-2 shares in “Sidi Kerir” against a share in “Ethydco”.
Ethydco was established in January 2011 with investments of about $1.9 billion, and its ownership structure is divided between “Sidi Kerir” 20%, the Petrochemical Holding Company 20%, Gasco 11%, the National Bank of Egypt 21%, Banque Misr 10%, the National Investment Bank 14% and others.
Sidi Kerir’s ownership structure is divided between the Egyptian Petrochemical Holding Company by 20%, the Social Insurance Fund for government sector workers 19.2%, the Social Insurance Fund for workers in the public and private business sector 12.2%, Al-Ahly Capital 6.9%, the National Investment Bank 6.9%, and the Egyptian Petrochemical Company 6.9% as well, and the rest is shares free on the stock exchange.