The toast of the town

By Sherine Abdel-Razek
A COLOSSAL deal will crown Al-Ahram Beverages Company (ABC) the virtually uncontested sovereign of the Egyptian alcoholic beverages market.
After seven months of negotiation, ABC has acquired El-Gouna Beverages Company, previously its only local competitor in the production of beer and wine. The LE255 million deal involves the acquisition of all of El-Gouna's four factories, whose products include Lowenbrau beer, Obelisque wine and bottled water.
Addressing a press conference held to announce the deal last week, ABC Executive Chairman Ahmed Zayat said that the takeover will give the company complete dominance in the local market for alcoholic beverages.
The move will give a much-needed boost to the company's plans to expand into new markets. "The reason that [the acquisition of] El-Gouna is significant in terms of timing is that it allows us the leverage to move very fast on beverage acquisitions in other Arab countries," Zayat said. He revealed that ABC is currently negotiating incursions into four other Arab markets to become producer of both alcoholic and non-alcoholic beer. He added that the deal is sure to help sustain the company's growth plans, saying that he estimates that the annual growth of earning per share (EPS) for ABC after the deal will reach 25 per cent.
Under the deal, management of El-Gouna, which was a subsidiary of Orascom Projects and Touristic Development (OPTD), will be handed over to ABC on 25 March, but it will be operated as an independent entity, with separate sales and marketing teams.
In addition to paying LE215 million in cash, ABC will assume LE40 million worth of El-Gouna's debt. The transaction will be financed by a five-year syndicated loan from a number of international bodies led by Citibank.
Launched in April 1999, the El-Gouna Beverage Group captured a 15 per cent share of Egypt's alcoholic beer market and 40 per cent of the wine market. OPTD owns 35 per cent of the El-Gouna Beverage Group, while Egypt's Sawiris family, which runs the Orascom group of companies, and Lebanon's Debbane family are among the other shareholders.
Just a day after announcing the deal, ABC offered its investors other sources of joy, posting an 11.7 per cent increase in net profits for the first six months of year 2000, compared to the same period during the previous year. Profits totalled LE44.52 million on sales of LE160.02 million. El-Gouna posted roughly seven million pounds in profit for the whole of 2000.
Since its privatisation in 1997, ABC has been expanding rapidly with new investments reaching LE1 billion. It is one of Egypt's nine companies with shares traded internationally as GDR's (global depository receipts). It was chosen last October by the American Forbes Global magazine as one of the 20 best performing small companies worldwide.
ABC shares reacted positively to the announcement of its acquisition ending the trading week at LE52.19 -- a LE3.19 increase on its opening price. As for OPTD, it ended LE1.03 lower at LE8.35.
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