Omar Effendi moved to the hands of a new owner who is willing to pay all its due financial obligations to banks and suppliers and solve its workers' problems. Sherine Abdel-Razek reports on the latest deal to sell Egypt's largest department store
Once again, Omar Effendi is being sold. Just a few weeks after the locally listed Al-Arabiya Lel-Istithmar said it will not be buying the store after the due diligence study ended in "unacceptable findings" in the department store accounts, the store made headlines again with news that it has already been sold.
The new owner is a company called Al-Aseel, owned by Egyptian businessman Yassin Aglan. According to statements by Aglan's lawyer, the businessman paid LE235 million in cash to Sheikh Gamil El-Ganbit, head of the Saudi Anwal Group, former owner of Omar Effendi. Moreover, Aglan will pay all the obligations on the company to banks, suppliers and tax authority, together mounting to LE635 million. This puts the overall value of the deal at LE880 million.
People close to the new owner, who made no media appearance since the deal was revealed, asserted that he has plans to pump LE200 million in cash, in the store, during 2011, in addition to contracting a specialised management company to manage the store, and has plans to add 190,000 metres of display area he owns to the store.
Just three years after moving to private hands and having a major facelift, the company is facing real financial problems that exacerbated when the management failed to pay its workers the November salaries, in addition to a deficit in the stores' inventory, something unheard of in the history of the 144-year- old store. The store has around LE350-400 million in debts to five banks, part of which are owed to the state-owned National bank of Egypt and Banque Misr, and dates back to the time when the store was still in public hands.
As for the workers' problems, the retail workers syndicate agreed with the company's trade union to give the new investor a six-month truce period to study the workers' problems revolving around the company failure to pay their annual bonuses since 2007.
Aglan's consortium, which his lawyer said included unnamed Kuwaiti and Qatari investors, submitted the best bid to Al-Ganbit who was approached by many businessmen among whom was Mansour Amer, head of Amer group, whose offer was turned down due to differences in the way to settle the financial obligations on the store.
So banks will be getting their money, workers' fears are allayed, at least for now, Al-Ganbit got his money back, and the store will be developed. There seems to be no better deal.
In reality, matters are not that rosy. Observers have reservations against the new owner who had a record of numerous law suits that drove him behind prison bars. Aglan was one of four businessmen accused, in 1996, of using forged documents to obtain large loans from the Commercial Bank of Daqahliya and Al-Nil Bank without collateral, by using their relationships with members of parliament in what was known as loan deputies' case. Investigations revealed that MP Tawfik Abdu Ismail gave Yassin Aglan, then chairman of Misr Food Company, sums of LE299 million and $17 million in loans and credit facilities, without listing them in the bank's books, against the payment of commissions. Investigations back then revealed that Aglan used the $17 million to secure astronomical profits by dumping huge quantities of imported sugar on the market.
The court sentenced Aglan to 15 years in jail but he fled and was then captured and returned to Cairo where he spent four years in jail before he had a debt settlement agreement with the banks.
As for the company he chairs, there was no mention of its field of activity or its headquarters and search for it over the Internet gave no results.
The history of a store- 1856: The first Omar Effendi store, on Abdel-Aziz Street downtown Cairo, was opened under the name of Orosdi Bak which is the combined family names of its two owners. The store, designed by the famous architect Raoul Brandon targeted high-end Egyptian families and foreigners living in Egypt.
- 1920: The name of the store was changed to Omar Effendi after it was sold to Turkish owners.
- 1957: The store was nationalised.
- 1960s-90s: The store witnessed major changes on the local economic and business scene to end up as a loss-making over-staffed store selling cheap and low quality commodities and in some cases the same commodities like its competition at higher prices.
- 1991: The company came under the umbrella of the Holding company for internal trade as a first step towards its privatisation
- 1999-2001: Two privatisation plans for the store failed due to buyers' reluctance to take on board the store's pay roll of 6,000 workers.
- 2007: Amid a heavy debate that saw then minister of investment Mahmoud Mohieldin facing accusations of squandering state money, 90 per cent of Omar Effendi was sold to the Saudi Anwal group for LE590 million. The state kept 10 per cent of the company.
- Mid 2007: The International Finance Corporation bought five per cent of the store which triggered a major facelift.
- November 2010: Al-Arabiya Lel-Istithmar, a holding company with many arms in real estate and energy, announced it was buying all Anwal's 85 per cent stake for LE320.
- December 2010: Al-Arabiya withdrew its offer after the due diligence revealed unacceptable findings in the store's books.
January 2011: Businessman Yassin Aglaan buys Anwal's stake for LE230 in addition to assuming financial obligations of LE635 million.
© Al Ahram Weekly 2011
