The Central Auditing Organization (CAO) dropped several bombshells with regard to the deal through which Misr Oil Processing Company (MOPCO) took over Agrium Company in exchange for an increase of MOPCO's capital. This deal came in the framework of the agreement struck by the government with the Canadian company (Agrium) to end the deadlock involving its project in Ras el-Bar (Damietta). According to this report, published exclusively by Al-Masry Al-Youm, some articles of this agreement entail liabilities and burdens for MOPCO if Agrium does not manage to live up to its obligations or to complete its project for any reason, while Agrium will keep its right to demand compensation if the agreement is not carried out. Article 4.2 of the agreement guarantees that at the end of the exchange of shares, Agrium shall obtain a bank loan of around $1.1 billion guaranteed by MOPCO. This loan shall be used to carry out the project, the dock and the warehouses without setting any timetable. On the other hand, the agreement does not mention any obligation on Agrium in case it does not manage to provide funding in light of the global financial crisis. According to the CAO's report, MOPCO and the Egyptian General Petroleum Authority (EGPC) are committed to paying the $120 million loan already obtained by Agrium, while article 9.3 of the agreement sets forth that Agrium shareholders have the right to demand compensation if the project is not implemented. The report unveils that the company has not obtained yet the approvals and authorizations mentioned in the agreement clauses, such as the approval of Damietta Governorate and Damietta's local council (and therefore of the civil society) on the additional facilitations at MOPCO's location in Damietta and on the construction of the dock and the additional building to store urea at Agrium's current location, east of the canal. The report adds that article 3.2 of the takeover agreement includes this remark and mentions the resolution of the Supreme Council for Energy in last August. According to this resolution, no industrial project may be set up in the region which has already been allocated to Egyptian Agrium's project, with priority given to tourist projects. According to the report, the evaluation of Egyptian Agrium included privileges of up to $297 million that could not turn into practical ones. It points out the company has a preferential privilege of $161.6 million and that this privilege could not turn into a real one if the project is delayed. The CAO's report adds that Agrium's evaluation also includes $135.3 million for the establishment of the dock and the facilities. It also affirms that this value can not turn into a real one if the project is not implemented. The report mentions that through this takeover deal, MOPCO shall become Agrium's only shareholder, which runs counter to the law on joint stock companies, which sets forth that founding partners must be at least two, otherwise the company is dissolved. According to the report, Article 2.3 of the agreement sets forth that MOBCO's statute can be amended so that it stipulates that the general assembly's extraordinary resolutions and the influential decisions of the board of directors require the approval of 80% of the majority attending the meeting. This means that influential decisions are approved only if Agrium, the "Canadian party", gives its approval, as Agrium shall hold 26% of MOPCO's capital after the takeover. The report drops another bombshell when it unveils that the Capital Market Authority (CMA) and the Investment Authority have not yet approved the takeover, although Article 2.2 of the agreement sets their approval as a condition. In its first page, the report says it focuses on the agreement concerning MOPCO's takeover of all the shares of the Egyptian company Agrium in exchange for an increase in MOPCO's capital by LE 996.1 million in the framework of an exchange of assets. The CAO also focuses on the report of the company's independent financial advisor about the evaluation of the rights of MOPCO's shareholders and the preparation of the data and documents related to the takeover and the evaluation. CAO is only responsible for expressing its opinion on these data and documents after reviewing them, while the report does not unveil the name of the independent financial advisor who made the evaluations.
