Privatization: Telecom Egypt rings in $891 million IPO
Telecom Egypt kick-started the Egyptian government’s privatization programme by completing the biggest IPO from the Middle East and North African region in 2005 in December.
The E£5.13 billion ($891 million) deal is the third-biggest IPO in the region for at least 25 years and just slightly bigger than Lebanese telecom operator Investcom’s $778 million in October 2005. The deal is the largest in the region since Maroc Telecom’s $1.04 billion IPO in December 2004.
The IPO was completed using an unusual volume-weighted average price pricing method.
“The deal was divided into a retail tranche and an international tranche,” says Albert Momdijan, head of Middle East corporate and investment banking at CSFB, joint global coordinator with local investment bank EFG Hermes on the deal. “The international tranche was done as a private placement but the government wanted to give retail investors a discount.
“The international tranche was sold using a type of auction in which the final price set was calculated using the volume weighted average price of bids received. The retail price was then determined by applying a discount to the international price.”
The deal technique, which has been used in previous Egyptian IPOs, helps to avoid some of the excesses that have plagued other hotly anticipated IPOs in the region.
Half of the 299 million shares sold by the government went to Egyptian and international institutional investors, 45% went to retail investors in Egypt and 5% to the company, which will offer them to employees.