UAE’s National Paints wins bidding war for state-owned Pachin

After a long quest by multiple companies to acquire state-owned paint maker Pachin, Emirati National Paints outbid other offers and secured 81 percent of the company’s stock for LE770.45 million (around US$25 million).

The government announced its privatization program back in February, but this is the first acquisition to go through.

As the government finds itself racing to sell $2 billion worth of assets by the end of June to plug a $17 billion financing gap before the end of the fiscal year, a number of other deals in the state’s offering program hit roadblocks due to political disagreements and disputes over their valuation and the currency used. After a long bidding war, National Paints’ final mandatory purchase offer was finalized in Egyptian pounds at LE39.8 per share, with the official exchange rate standing at $1 to LE30.95 on Wednesday.

Pachin is one of the 32 companies listed in the program, and Gulf as well as Egyptian investors have been eyeing the company since last year, when it began to become profitable. National Paints initially showed interest in November 2022.

Owners of around 81 percent of Pachin’s shares, about 19.35 million of its 24 million shares, responded to the Emirati company's offer, according to an Egyptian Exchange disclosure.

The state-owned Holding Company for Chemical Industries, which owns the majority stake of 44.6 percent, and Banque Misr, which owns an estimated 10.52 percent, both agreed to sell their shares, sources close to the deal told Mada Masr. Misr Insurance also sold its 1.25 percent stake.

The sources added that the Emirati company is considering keeping the company's shares listed on EGX for now.

Speaking to Bloomberg Asharq, the head of research at Egyptian brokerage firm Prime Holding, Amr al-Alfy, described the deal as a “positive sign for the government's exit from companies in favor of the private sector, regardless of the small size of the deal's value. It is a good sign.”

Emirati interest in Pachin predated the government’s February announcement of the privatization program.

Pachin had received five offers since last summer, with the sale turning into a bidding war between the UAE company and Egypt's Eagle Chemicals. The increasing interest in Pachin, in contrast to other companies in the privatization program, is because the company became profitable by the end of last year, bringing in LE19.05 million in net profits in 2022 compared to LE12.8 million in losses during 2021.

Egypt is awaiting the first review of its ongoing International Monetary Fund loan program to secure its second payout. The review was postponed from March, with the IMF citing Egypt’s significant financing gap to cover debt servicing and strategic imports — standing at $17 billion — as the main reason behind its rescheduling, according to a source informed of the discussions between the government and the financial institution.

Cairo was hoping to fill this deficit by borrowing from international institutions and selling off state-owned firms to strategic investors, with a particular eye for Gulf money. But disputes around value, strategic losses and the size of the shares up for grabs have halted several major sales to Gulf investors, including the sale of Telecom Egypt shares to the UAE, and the sale of the company’s stake in Vodafone Egypt to Qatar.

With the review coming up fast, Madbuly announced on Saturday morning that ten companies affiliated with the Armed Forces will be offered on the stock market, and reiterated that the state expects to make around $2 billion from the privatization program.