Act Financial: The Unique One
ACTF: IPO Price EGP2.9/share; Fair Value EGP4.8/share (before discount) & EGP3.9/share (after discount); Not Rated
Egypt / Non-Banking Financials / Pre-IPO Note
The Unique One
Welcoming an activist pioneer in Egypt
A unique player goes public:
By the end of 2023, Act Financial [ACTF], one of Egypt’s well-known direct investment companies, announced its intention to float on the Egyptian Exchange (EGX). The offering represents a minority stake of ACTF at c.32%, with an offering size of EGP1.04bn through a 47% capital increase to EGP281mn, adding 360mn new shares at a par value of EGP0.25/share. The IPO has two tranches: (1) Private subscription worth EGP870mn and (2) Public subscription worth EGP174mn. The IFA set ACTF’s price initially at EGP4.54/share before applying a10% liquidity discount and a 10% minority discount down to EGP3.63/share and another 20% discount down to EGP2.9/share.
A one-and-only business model:
ACTF was established in 2015 as an investment company, with a vested interest set up that assures zero conflict of interest between shareholders and management. ACTF has been following an investment approach known as Private Investment in Public Equity (PIPE), where it acquires influential minority stakes in public companies while assuring low exposure to market volatility and value traps. PIPEs affirm ACTF’s activism goal through: (1) enhancing the shareholding structure, (2) optimizing balance sheets, and (3) inviting strategic partners to the consortiums. ACTF utilizes leverage in making its acquisitions.
An attractive investment landscape:
Egypt’s investment landscape has become very attractive, especially following the EGP devaluation, which rendered its equity capital market deeply discounted. Thus, there is potential for the market to reach its pre-devaluation level again. Moreover, Egypt’s macroeconomic dynamics took a positive path, where external funding sources improved, backed by better infrastructure investments. Additionally, the regional appetite for Egypt grew strongly as most recently seen in the UAE’s investment in Ras El-Hekma.
Subscription offering & investors’ protection:
ACTF is opening subscriptions for both private and public tranches of its offering, starting on July 9, 2024. For individual investors in the private tranche the minimum investment is 1.75mn shares, while for institutions the minimum is 3.5mn shares with no maximum limit. Payments are due after the allocation through AAIB where all brokerage companies can place orders. For the public tranche 25% down payment is required before allocation. To increase investors protection, a stabilization fund will be established covering the public tranche for the first 30 trading days. In addition, ACTF promises to launch a 10% treasury shares program during the first 90 days to buy back shares if the share price plummets below its IPO price of EGP2.9/share. In addition, current shareholders are subject to a 12-month lock-up period and potentially is extended for 2 years for executives and strategic shareholders (<10% stake).
For more details, please download the full report below.
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