Egyptian economists are warning about the danger of expansion in acquisitions and mergers between foreign companies or investors and Egyptian companies. They say this would allow foreign companies to monopolize important sectors of the Egyptian economy. They cited the cement sector as an example, which has become wholly owned by foreign companies. The telecommunications sector as well is mostly owned by multinational companies, said the experts, despite the risk to Egypt's economy and national security. In recent months, the Egyptian market has had several large acquisitions, including one involving the Egyptian Ministry of Transport on the acquisition by Dubai World Port Development Company of a concession contract to manage the first port in Ain el-Sokhna, on the Red Sea, with investments of about U.S. $1.3 billion. Abraaj Capital acquired El Borg Laboratories with 3.5 million shares, representing 76.8 percent of the company and around 778.3 million EGP (U.S. $131.9 million). Indian investors in the Indian Pavajaoto Raghuram Shetty own 1.2 million shares of Alexandria Medical Services, equaling 86.3 percent of all shares, and while Bank Audi of the Audi Saradar Group owns the majority of shares of Arabia Online, a subsidiary of Naeem Holding. The year 2010 was also marked by a number of acquisitions: Hermes financial group acquired the Lebanese Bank of Credit through 65 percent of all shares, valued at $542 million, in addition to the right of the option to purchase an additional stake of 25 percent at the same price, which can be implemented during the next two years. Sodic acquired 40 percent of Palmyra through buying shares of subsidiary Belhasa International and part of the shares of Mr. Firas Talas, to acquire 50% of all shares. The Swedish Electrolux Company has a controlling stake of 52% of the shares of Olympic Group, owned by the Capital Paradise. Orascom Telecom, owned by Egyptian telecom tycoon Naguib Sawiris, merged with the Russian company VimpelCom. Technical Analyst Technician Sameh Gharib said the new acquisitions between the major companies may be evidence of the weakness of the national economy, but may also be a sign of strength due to the nature of these acquisitions. He also pointed to a significant risk that may result from these acquisitions: he said they may allow foreign companies to acquire companies in important sectors that could affect Egypt's economy or national security, as happened in the cement companies, resulting in an unjustified increase in the price of cement. Gharib added that the government is now trying to correct the situation by offering new licenses for cement producers. There should be new policies and rules to control foreign investment while not curtailing it, said Gharib, as the Egyptian market needs such investments and funds for developing and growth, which consequently create jobs, but only if such investments are not against the public interest. Adel Muhsin, an expert in capital markets and managing director of the Pioneers Investment Fund, said the acquisitions and mergers must be under governmental supervision, even if between private companies, especially if there is a foreign party involved in these transactions. He said that the method of payment in transactions, especially local transactions, can have a significant impact on the market, especially transactions they depend on loans from local banks. He said the process of assessing shares in the Olympic Group, for example, was ambiguous. Swedish company Electrolux recently acquired the group. Mushin warned that the existence of opportunities to acquire many important companies cheaply would wreak havoc on the Egyptian economy. Financial analyst Salah Haidar said the stock market is a market for non-direct investment, and that it can promote direct investment in the market first if properly handled and thus increase development rates. Haider said European and American companies began looking for new opportunities and activities where they can make large profits, especially now that they face fierce competition from Chinese, Indian and Korean companies. These companies have now captured nearly 60 percent of investments in Africa, said Haider, so U.S. and European investors are looking for alternatives with the capacity to make large profits and offset losses suffered during the global financial crisis. This leads them to countries like Egypt, he said. Haider said he expects food, agriculture, medicine, petrochemical and basic resources export companies to be acquired in the coming period by foreign companies.
