Pushing the decision of one of the largest iron companies Egyptian Exit from stock market The local government decided to voluntarily write itself off, with observers fearing the consequences of that decision, and that it would be a prelude to a series of exits from the stock market in the most populous Arab country (107 million people), especially with the complex and chronic structural crises that the economy, classified as the second largest African economy in 2024, is suffering from. .
The board of directors of the company decidedEzz iron“owned by businessman Ahmed Ezz, began the voluntary delisting of its shares from the Egyptian Stock Exchange and purchased the shares of shareholders who objected or wished not to continue with it and the shares subject to certificates of deposit on the London Stock Exchange, with a maximum price of up to 120 pounds per share, according to a statement on Sunday.
Regarding financing the delisting process, the local newspaper “Al Borsa” revealed that the company obtained a loan from the Emirates National Bank of Dubai (NBD), in addition to a portion of the company’s available cash to finance the delisting process that “Ezz” has been seeking to implement for some time, and is expected to be completed within months. The next three.
Ezz Steel, which is ranked among the 20 largest companies listed on the local stock exchange, has the second highest relative weight in the basic resources sector, amounting to 22.87 percent. Its share price immediately fell, on Monday, by 4.51 percent to close at 107 pounds ($2.12), causing the company to lose 2.7 billion pounds ($53.7 million), reaching 58 billion pounds ($1.1 billion).
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“The importance of the company and its size in the market”
Ezz Steel was established in 1959, under the name “Ezz Foreign Trade” as an importer of rebar. In the 1970s, it became the largest importer and distributor of steel in Egypt. In 1994, Ahmed Ezz established the “Ezz Steel” factory in Sadat City in the Nile Delta, expanding the following year in the city. 10th of Ramadan, to establish his largest factory in Suez, east of Cairo, in 1998, then in Alexandria in 2000.
The company produces all types of rebar, steel wire coils, steel flats, and prefabricated iron mesh. It describes itself as one of the fastest growing steel producers, while the production capacities of its factories in the cities of Alexandria, Suez, Sadat, and 10th of Ramadan reach 7 million tons annually.
In 1999, Ezz Steel offered its financial shares for public subscription, then acquired its first controlling stake in the Ezz Dekheila Steel Company – Alexandria, with a production capacity of 2.1 million tons annually, while in 2006 it was able to unify the group’s structure.
On its way to expansion, in January 2022, “Ezz Dekheila Steel” purchased 18 percent of the “Egyptian Steel” company from businessman Ahmed Abu Hashima, so that in September 2023, “Ezz Steel” would acquire the Egyptian government’s share in “Al-Ezz.” Dekheila Steel”, amounting to about 31 percent.
The ownership structure of “Ezz Steel” is distributed at a rate of 61.46 percent to Ahmed Ezz, and 6.74 percent to “The Bank of New York Mellon,” and the remaining percentage is freely traded shares on the Egyptian Stock Exchange.
Ezz Steel’s sales exceeded 100 billion pounds ($2.03 billion) during the first half of this year, while it recorded profits of 2.3 billion pounds ($45.9 million), compared to losses amounting to 810 million pounds ($16.3 million) during the same period in 2023. .
However, according to a disclosure sent to the Egyptian Stock Exchange, the company incurred currency exchange losses amounting to 1.33 billion pounds during the first half of the current year.
The company is facing several crises, including the European Commission’s investigation into the European Steel Association’s complaint regarding the imposition of dumping duties on European Union imports of flat-rolled steel from Egypt, India, Japan, and Vietnam, while Ezz Steel is the only Egyptian source of it.
On November 27, the second smelting furnace at the company’s factory in Ain Sokhna broke down, causing the company’s shares on the Egyptian Stock Exchange to decline by 9.33 percent, resulting in a market loss of 5.8 billion pounds ($117.9 million).
“Government share to the sovereign fund”
In his view of the reasons for delisting Ezz itself from the Egyptian Stock Exchange, Egyptian economist and academic Dr. Ahmed Zikr Allah said, “Delistings are successive processes and have occurred on the Egyptian Stock Exchange more than once since 2009 until now.”
Speaking to “Arabi 21”, he confirmed that “the negative impact on the stock exchange and on its overall work continues with this delisting, because the market capitalization of the stock exchange is negatively affected by the fact that the exiting company now is Ezz Steel, a large company.”
He pointed out that “Ezz Steel obtaining a loan from an Emirati bank comes based on the text of the law. When the company or its general assembly decides to delist from the stock exchange, the company is obligated to pay the value of the shares to the shareholders who object to the delisting.”
He explained, “Therefore, we note that this process is adjacent to Ezz Steel Company’s announcement of contracting with one of the specialized companies, namely: (BDO Keys Financial Consulting) to conduct a fair evaluation of the current market price of the stock.”
Regarding the reasons driving Ezz Steel for such delisting, the Egyptian academic said: “There is not much that has been announced, but we must know first that the government’s share in Ezz Steel was about 14 percent owned by the National Bank and the National Investment Bank.”
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He added: “It was said that this share had already been transferred to the Egyptian sovereign fund, and that the fund might sell it to a strategic investor, and perhaps there was a pre-emption by Ezz Steel that the company could seize the government’s share.”
He concluded his speech, noting that “it was said that there is also an implicit agreement between the company’s management and the government to obtain the government’s percentage during the coming period, and that this delisting from the stock exchange may be a prelude to such measures.”
“Looking for perks”
Regarding the implications of the exit of one of the largest steel companies from the Egyptian Stock Exchange, the reasons for the company’s decision, and its possible future intentions to register on other Arab or international stock exchanges, the writer, researcher, and economic analyst, Mohamed Nasr Al-Huwaiti, spoke to “Arabi 21.”
He said, “Ezz Steel no longer sees privileges for it on the Egyptian Stock Exchange, and that the local stock market does not offer it anything at the present time.”
He added: “Yes, according to the information I have, it is considering listing itself on the Abu Dhabi Stock Exchange, but not now, and not immediately after the end of the delisting process, which will take about 3 months.”
Regarding the impact of Ezz Steel delisting itself on the Egyptian Stock Exchange, and the size of the void it leaves in the local stock exchange, he pointed out that “Ezz’s exit will have a major negative impact, and will leave a void, because it is one of the largest Egyptian companies and has a very high market value, and it will reduce the market value or reduce its capital.” The market capitalization of the Egyptian Stock Exchange, which needs an alternative to compensate for a company with its high status, capital, and large weight in the main index of the Egyptian Stock Exchange (EGY X30).”
He pointed out that “over the years, large companies such as Orange, Vodafone, Ahli United Bank, and companies such as Global Trico and Bakken have exited from the Egyptian Stock Exchange, all of which left a vacuum because they had a high relative weight, but unfortunately Ezz is one of the largest companies that leave a vacuum and therefore must “There must be a strong alternative to compensate for her exit.”
Regarding the privileges that exist in the rest of the Gulf, European and American stock exchanges and that do not exist in Egypt, and which tempt major companies to register with them, including the Egyptian one, Al-Huwaiti said: “There are no other privileges in other stock exchanges other than increasing the number of investors.”
He believes that “the advantages in listing in other markets are represented by the (profitability multiplier) or (profitability multiplier), which is high because the demand or demand for stocks is large from investors and dealers, and not weak like the Egyptian capital market, which is small compared to other markets, and whose situation is… The economy is more stable.
He stated that “Ezz Steel has shares traded on the London Stock Exchange, and I expect it to delist them; but when any company trades its shares on international and Gulf stock exchanges, such as the Abu Dhabi or Dubai market, it has better privileges than the Egyptian market, but the question is: Will it be able to comply with the special trading rules?” In foreign markets or not?
At the end of his speech, Al-Huwaiti stressed the importance and impact of the issue of the exchange rate of the Egyptian pound against the dollar and other foreign currencies and that it was one of the reasons for Ezz Steel delisting itself from the local stock exchange, and one of the factors that makes any investor leave for other stock exchanges.
The price of the pound continues its downward journey against the dollar in recent days, as it touched 51 pounds against the dollar at the beginning of Tuesday’s trading, recording at the Central Bank of Egypt 49.9352 for purchase and 50.0697 for sale, compared to 49.94 pounds for purchase and 50.04 pounds for sale at the close of last Thursday’s transactions.
“Mismanagement…and escaping from distributing profits.”
Economic analyst Hashim Al-Fahmawy gave the example of Damac, one of the largest Emirati real estate companies registered in the Dubai market, explaining that it “was recording strong profits and strong revenues and distributing annual dividends to its shareholders on a regular basis, but it wondered: Why do I distribute this amount of profits in… stock market?”.
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Therefore, the business and finance expert believes that “mismanagement of the Egyptian Stock Exchange caused the withdrawal of Ezz shares from the local market,” adding: “I spoke about this matter months ago, and even expected that companies would withdraw from the Egyptian stock market, due to the weakness of the stock market.”
It is believed that “this withdrawal, or the cancellation of Ezz Steel itself, is not unusual for a company that has profits and revenues, as its withdrawal is normal and thus saves its management from distributing annual profits of no less than between 200 and 400 million pounds annually, which it provides for its projects, without distributing profits to shareholders, and in fact it does not want to.” To continue in the stock market until these profits are distributed no more.”
Regarding the negative impact of delisting Ezz Steel itself on the Egyptian Stock Exchange, Al-Fahmawy says: “The Egyptian financial market is not based on Ezz Steel alone, as there are more than 200 companies on the local stock exchange, so delisting it will not have a major impact, and if there is an impact, it is summed up in the psychological factor.” no more”.
He expected that “other major companies will take the same approach, and Egyptian companies will withdraw from the stock exchange as Ezz Steel did,” hinting that “the problem of the continuous decline in the value of the pound undoubtedly negatively affects companies’ revenues and profits, and when distributing annual profits as well.”
He stressed that “this is one of the reasons for Ezz Steel’s withdrawal, that the value of the pound is constantly declining against foreign currencies, and the company is achieving revenues that decrease with the rise in the price of the dollar, which recorded more than 50 pounds at a record rate, and may reach more than that, and therefore when distributing profits to shareholders The company is losing, and therefore Ezz Steel preferred to take the delisting decision, which I do not rule out that other companies will take.”
Regarding the possible destination to which Ezz Steel may direct its shares, and whether they are the stock exchanges of the Gulf countries or Europe and America, it is expected that “one of Ezz’s companies will obtain a license in the Emirates, so it is possible for it to offer a new subscription in the Emirati market or to open a branch of the company in Abu Dhabi and the parent company.” You stay in Egypt.”
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“Ezz…from Mubarak to Sisi”
Ahmed Ezz has remained controversial for nearly 28 years, as he emerged on the economic scene in a questionable manner during Mubarak’s era, amid accusations that he monopolized the iron market and amassed huge financial wealth, supported by his extensive connections with Mubarak’s two sons, Alaa and Gamal, since 1996.
But he later emerged as a politician in a high position as secretary of the organization of the dissolved “National Party,” ruling during the Mubarak era, and then as head of the Planning and Budget Committee in the People’s Assembly.
Following the revolution of January 25, 2011, the Egyptian prosecution accused him of financial corruption and profiteering, seizing the shares of “Dekheila Iron and Steel – Alexandria” and transferring them to “Ezz Dekheila”, monopolizing the iron and steel industry, and exploiting influence to seize public money, money laundering, and creating… Huge wealth illegally, amounting to 4 billion and 821 million pounds, between 2001 and 2011).
In March 2013, the Giza Criminal Court sentenced Ezz to 37 years in prison, spending 3 years in prison. He was then released on August 7, 2014, two months after Sisi assumed power, following an agreement to pay 100 million pounds in the iron monopoly case.
