The daughter of jailed Egyptian businessman Ahmed Ezz said her father is rejecting offers for his steel company after courts under the new Islamist government fined him $3.8 billion and sentenced him to 44 years in prison.
“We’ve been approached by everybody who is anybody in the steel industry globally and entertained a lot of investment bankers looking at the idea” of a sale, Afaf Ezz, a former London-based Morgan Stanley (MS:US) metals and mining M&A banker who’s under a travel ban in Egypt, said in an interview in Cairo. “The company is ready for expansion mode.”
Ezz, held in the same high-security Tora jail outside Cairo where former President Hosni Mubarak is imprisoned, is among several prominent Egyptian businessmen being probed for his dealings under the former regime. The sale of investment bank EFG-Hermes Holding to Qatar’s QInvest has been delayed amid legal cases against co-chief executive officers Yasser El Mallawany and Hassan Heikal, while Nassef Sawiris’s Orascom Construction Industries (OCIC) is being investigated over taxes.
During the 18 days of revolt before Mubarak stepped down two years ago, Ezz’s company headquarters were burnt down, he was banned from travelling and had his assets frozen. He was jailed on Feb. 17 and shares a cell with three former regime members, Afaf said. Ezz, 54, has a 66 percent stake in the company.
Courts have fined him a total of about 26 billion pounds ($3.8 billion). His 44-year prison sentences includes a 37-year term handed down on charges he improperly acquired state-run metal producer Al Dekheila in 1999.
Shares of Ezz Steel dropped 1.8 percent to 9.45 Egyptian pounds at the close of trading in Cairo, valuing the company at 5.13 billion pounds.
Ezz denies all the charges and has started the appeal process against the decisions, Mohammed Tanweer El-Rafie, his lawyer, said in an e-mailed statement to Bloomberg News. Mahmoud El-Hifnawy, the public prosecutor’s spokesman, wasn’t immediately available to comment when contacted by Bloomberg.
“The main misconception is that Dekheila was a national treasure that Ezz stole,” said Afaf, who studied at the London School of Economics. “In reality it was a struggling company with a cash flow crisis that was bought from international investors.”
As a Mubarak ally and member of the National Democratic Party secretariat, Ezz built the company into the largest steel producer in the Middle East and North Africa through a two- decade acquisition and building spree that boosted output to 5.8 million tons from 250,000 tons. It also has a $1 billion expansion plan to increase production to 7 million tons.
That’s now on hold as the company awaits more clarity on Egypt’s future direction, Kamel Galal, the company’s head of investor relations, said in an interview. Even so, sales are increasing, rising about 12 percent in 2011 as unregulated homebuilding intensified after the revolution, he said. The construction of a $500 million direct-reduced iron plant is 80 percent complete and the company may start a second, he said.
Steel prices increased 20 percent in Egypt in 2011, Galal said. Demand for steel is strong because 65 percent of the country’s 83 million people are under the age of 25, he said.
Companies like Ezz, Orascom and EFG-Hermes Holding flourished when Egypt’s economy averaged growth of about 7 percent in the three years through 2008 as tax cuts and state asset sales attracted foreign investment of as much as $13.2 billion a year under millionaire ministers like Rachid Mohamed Rachid.
Rachid paid a 15 million-pound fine last month to overturn a 15-year sentence in absentia for squandering public funds in connection with a steel license granted to Ezz.
While Paul Chekaiban replaced Ezz after he resigned as chairman in May 2011, Afaf said her role has been increasing over recent months. Afaf said she returned to Cairo in 2010 to gain more corporate experience after working as a banker.
“I’ve been getting more involved now, the last few months,” she said. “It’s more of a managerial, coordination role because the problem today is that the legal case is such a big part of what the company is facing and this also bears on my family.”
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