Egypt's Sovereign Wealth Fund Seals $800 Million Hotel Stake Deal with TMG

Egypt's sovereign wealth fund has inked an $800 million agreement to offload a portion of its ownership in seven renowned hotels to Egypt's Talaat Moustafa Group (TMG).

Prime Minister Mostafa Madbouly announced this development on Wednesday (20/12).

Madbouly revealed that the revenues generated from divesting state assets have now touched a substantial $5.6 billion mark.

The government's decision to sell off stakes in various state-owned entities comes amidst Egypt's persistent challenges, including a prolonged foreign currency shortage and mounting national debt.

However, a detailed breakdown of these revenues was not provided by Madbouly.

With the recent presidential election concluded, experts anticipate an acceleration in stake sales.

These divestments are pivotal for Egypt, aiming to alleviate the sustained pressure on the Egyptian pound, infuse much-needed foreign reserves, and initiate economic reforms in line with the stipulations of an IMF loan program.

Notably, past attempts to offload state assets have faced obstacles, with both the state and military holding dominant economic positions.

Providing specifics of the hotel portfolio deal, a statement from the cabinet highlighted that TMG has secured a 39% stake, retaining an option to elevate its ownership to 51%.

Hisham Talaat Mostafa, TMG's CEO, informed Reuters that international investors are poised to inject capital into the TMG holding company. He mentioned, "A comprehensive presentation detailing this will be available in two to three weeks upon finalizing the deal."

Further details emerged from a TMG press release, indicating that an international entity will procure a minor stake worth $882.5 million in TMG's hospitality arm, ICON.

This acquisition is structured in a manner where ICON will subsequently acquire the $800 million stake in the state-backed consortium overseeing the seven iconic hotels.

Among these establishments are the historic Cataract in Aswan, Winter Palace in Luxor, Mena House in Cairo, and Cecil in Alexandria.

Parallelly, the Egyptian government, in collaboration with the International Finance Corporation, has initiated preliminary assessments for the potential divestment of around 50 firms.

Sectors such as airports and telecommunications are receiving priority attention in this endeavor.

However, it's worth noting that a previously established $3 billion financial arrangement with the IMF faced setbacks when Egypt did not adhere to conditions like allowing its currency to float freely or making headway in state asset sales.

Consequently, the IMF postponed disbursements amounting to approximately $700 million earmarked for 2023.

Despite these challenges, recent developments suggest a possible expansion of the IMF package, with a renewed focus on inflation targeting rather than solely the exchange rate.

Madbouly reassured stakeholders by stating that discussions with the IMF remain ongoing.

He hinted at an upcoming announcement detailing a revised timeline for these discussions.

Patrick Werr / Reuters