Background: Back on 18 October 2018, we had picked Electro Cables Egypt (ELEC) as one of the stocks that we thought are worth considering in view of its turnaround story which was not reflected in its valuation. A month later, on 18 November 2018, ELEC notified the market that Pioneers Holding (PIOH)—already a major owner at the time with a c.48.5% stake—was interested in raising its stake in the company through a tender offer. PIOH, through its subsidiaries, had offered to buy up to 294,979,315 shares (equivalent to 41.46% of ELEC) for EGP1.35/share, raising PIOH’s effective stake in ELEC to 90%. By March 2019, the IFA appointed by ELEC said that the company’s stock fair value came out to be EGP1.83/share, using the weighted average of the book value, DCF, and multiples valuation, c.35% higher than the PIOH’s offer price. Nonetheless, the offer which ran through 4 April 2019 was accepted by 139.4mn shares, effectively raising PIOH’s stake in ELEC from 48.5% to 68.1% and reduces its free float from 48.4% (344.4mn shares) in Q1 2019 to c.29% (c.205mn shares).
For more details, please read the full report below.