Five years after its inking, the contract selling Omar Effendi has been scrapped, Niveen Wahish reports It was a deal that got off on the wrong foot from the very start. For years, Omar Effendi had been lined up for privatisation and when a buyer came along, there was a huge debate on the appropriate sale value. It was sold to the Anwal Group for LE589.5 million (slightly less than $100 million at today's exchange rate). And that debate did not die out with the sale especially since the company did not do particularly well. Although immediately post the sale the store was rebranded, modernised and well stocked, that did not last for long. Last year, many of the stores stood with empty shelves and some were closed altogether, hoards of employees opted for early pension and those who stayed complained that they were not receiving their dues. Even an attempt at resale failed due to unsatisfactory diligence towards the company interested in making the purchase. This week a court ruling annulling the contract with the Anwal Group put to rest the qualms of everyone against the sale in the first place. The court ruled that the contract was not valid. The Anwal group had taken a 90 per cent stake in Omar Effendi with 10 per cent being retained by the government. Sherif Sabry, current head of Omar Effendi's financial and administrative department told the Weekly that he would not comment on the ruling until its actual terms are out, but he said that initially it seems that the ruling is against the contract itself, not against the investor. In that case, Sabry said, it is by no fault of the investor that that happened. "There was a transparent process which the company went through to buy the store with the knowledge and in the presence of all government authorities and the Central Auditing Agency," said Sabry. He added that coming five years later complicates the situation and means that both parties have a lot to lose. Hamdi El-Fakharani, the engineer who had filed the lawsuit, has been quoted as saying that he will take to court everyone involved in the sale, starting with former prime minister Ahmed Nazif and former minister of investment Mahmoud Mohieldin, to every member of the evaluation and sales-related committees. El-Fakharani has taken upon himself to file lawsuits against what he claims are corrupt deals. He previously filed and obtained court rulings regarding Madinaty, the housing development by Talaat Mustafa Group and the Katameya Project of Palm Hills. Ezzat Mahmoud, member of the sale follow-up committee in the holding company for construction and former head of Omar Effendi during the time between the signing of the contract and the actual handover of the company to the buyer, thinks the court ruling has long been awaited. He said even if Anwal appeals the verdict that does not stop the execution of the ruling. "The company has fallen apart. Rent is not being paid for 58 rented branches which threatens their loss. The employees have not been receiving their salaries and many branches have been closed down," Mahmoud said, adding that the ruling obliges the investor to return Omar Effendi as he first received it. "He was supposed to pump in new money and investments. Instead, he pawned some of the branches. Now, not only is it a loss-making company, but it is also indebted to banks," he said. However, Sabry argues that pawning branches is an acknowledged means of finance, and that like many businesses following the global crisis in 2008, Omar Effendi faced problems too. He also refuted accusations that workers who applied for early retirement did not get their dues saying "not a single employee who was misled into filing a lawsuit won a case against the company." Sabry questioned what the government would benefit out of retrieving Omar Effendi, since "if the government was able to turn its performance around, it might as well have done something with the chains which are still in its ownership such as Sednawi." He added that at least when it is in private hands, it is the investor who bears the losses and the government does not have to shoulder the bill. He said the company could revert to arbitration to insure its rights particularly since the initial ruling says that it has to return the company in its original status. "If the company had to return the store in return for its money, it would have been less complicated." Sabry does not yet know if this situation can be settled amicably as with the Al-Walid's Toshka land. "In that case, there was no lawsuit and court ruling in the first place," he said. Mahmoud, though, does not believe that Omar Effendi is a lost cause. He believes it could be turned around into a first rate commercial centre seeing the potential it has in terms of the number of branches across the country. The store has a total of 82 branches nationwide. It needs financial backing, marketing and employees. While the company had 5,000 employees at the time of sale, today, he says, they are around 2,800. The store is considered a national icon. It dates back to 1856 when it was called Orosdi Back. It changed hands and acquired its current name in the 1920s. It was nationalised in 1957.
