CAIRO: In a statement by the Cairo and Alexandria Stock Exchanges, the Sixth of October Development and Investment Company (Sodic) made a net profit of LE 50.52 million ($8.88 million) in the first quarter of 2007 - after a net loss of LE 2.1 million in the same quarter last year. According to HC Brokerage, Sodic has "managed to pull the bottom line out of the red after the recorded hike in its income. That is, primarily, due to higher sales and margins as well as a higher net interest income of LE 14.3 million versus a net interest expense of LE 3 million, explained Nematallah Choucri, head of research at HC. Sodic has been making headlines lately after the failure of the Palm Hills deal and again after announcements of the Solidere Cairo deal. Merger talks between Sodic and Palm Hills for Development - owned by Mansour-Maghraby Investment Group - failed after signing a binding legal agreement for a full merger that was on track till earlier this month. The deal initially involved Sodic's purchase of 3,070,000 shares constituting 100 percent of Palm Hills' share capital in exchange for 25,369,161 new shares to be issued by Sodic. Following the transaction, Sodic would have had a total of 53,282,557 outstanding shares and a market capitalization approaching LE 7.5 billion, making it the 14th largest listed company on the Case. The widely talked about marriage would have made Sodic the owner of 3.74 million square meters in Sixth of October City and Katameya as well as 2.1 million square meters on the North Coast, bringing Sodic's total share of land up to approximately 12.54 million square meters. Additional advantages of the transaction included Palm Hills' 10 year tax exemption as well as a number of valuable brand names including "Palm Hills, "Shehab Mazhar and the right to use the "Hacienda brand name in Sodic's new project on the North Coast. However, the share swap deal - which represented a major milestone in the Egyptian corporate landscape marking one of the largest ever consolidations seen in the country - failed due to the fact that Palm Hills did not fully transfer ownership of some of the lands owned by its subsidiaries, Sodic announced in a statement. Palms Hills now retains full ownership of its land bank in Sixth of October, Katameya, and on the North Coast. While Sodic's land bank remains limited to 4.4 million square meters in Al-Sheikh Zayed and one million square meters in Katameya. "Further implications of the failure of the deal entail that Sodic will not benefit from Palm Hills tax exemptions and will start paying taxes in 2008, Choucri stated. "Sodic will also continue developing land at the same cost, as opposed to a lower development cost per square meter had the deal gone through. Sodic shares have recently traded at different prices over the Case. On Sunday, share prices dropped to sell at around LE 150.00, later slipping to LE 145.08 on Wednesday (way below Sunday's closing price). "Ever since the failure of the Palm Hills deal, Sodic stock has witnessed a decline [particularly] over the last week, Choucri pointed out. Soon afterwards came more news; the signing of a landmark agreement to co-develop two projects in Cairo with Lebanon s Solidere real estate giant. One project is in the Sixth of October/Sheikh Zayed City. The other project is in Katameya on an 8.6 million square feet site near the new American University in Cairo. According to Sodic, the projects will be developed over five years with a total investment of over $1.4 billion. Sodic expects both projects to develop into cities of 2.5 million people each within 10 years. It published in a press release that it would be in charge of financing, construction and building while Solidere would be responsible for the architecture, general supervision and real estate management of the projects. Solidere is internationally renowned for its successful re-development of the war ravaged city center of Beirut into a thriving modern city center harmoniously integrating a mix of residential, commercial, and entertainment activities. However, following recent Hezbollah's protest rallies in downtown Beirut, Solidere had to look elsewhere for business, and luckily for Sodic they chose to come to Egypt.
