Egypt: TSFE outlines three potential acquisition strategies for Misr Pharmacies

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Egypt - Misr Pharmacies is gearing up to channel EGP 120m into expansion and digitalization efforts this year, as per recent media disclosures. CEO Ahmad Hassan of Misr Pharmacies has revealed plans to allocate EGP 100m for the launch of 10 to 15 new outlets within the year, alongside EGP 20m dedicated to developing a mobile application to facilitate online transactions and delivery services.

The Sovereign Fund of Egypt (TSFE) has delineated three prospective approaches for the takeover of Misr Pharmacies, as informed by insiders speaking to Daily News Egypt.

The informants disclosed that under the primary approach, TSFE would assume an 88% stake, while Mamdouh Al-Amin, the current proprietor of the pharmacy network, would maintain an 11% share. This arrangement hinges on the expedited settlement of the firm’s banking debts and the allocation of EGP 50m towards operational enhancements. This proposition predicates on the enterprise securing operational earnings surpassing EGP 100m.

The second approach envisages TSFE acquiring a 75% interest in the pharmacies, with the founder retaining a 25% share, contingent upon loan repayment and an operational fund of EGP 50m. This scenario mandates the achievement of operational profits over EGP 150m.

The ultimate approach involves TSFE taking full ownership, amounting to 100%, and directly overseeing management and operations.

The sources elucidated that Misr Pharmacies is encumbered with financial liabilities exceeding EGP 2.1bn, segmented as follows: bank debts totalling EGP 1.278bn to 16 financial institutions, which, if settled promptly, would be reduced to approximately EGP 596m.

The company is also beholden to financial leasing agreements valued at EGP 84m, factoring contracts worth EGP 136m, and supplier dues amounting to EGP 392m, among other commitments.

It was further conveyed that the fund intends to consummate the transaction via its healthcare-focused subsidiary and is presently appraising the firm to finalize the deal by this year’s third quarter.

In a concurrent development, the Sovereign Fund of Egypt, through its TSFE Healthcare & Pharma Subfund, in concert with prominent private equity entity B Investments, heralded the inception of EZ International. This venture, established in partnership with the esteemed El-Ezaby Pharmacy chain, is poised to provide logistical and managerial support to pharmacies, in addition to pharmaceutical distribution and commercial services.

El-Ezaby Pharmacy has a controlling interest in EZ International, possessing 51% of the enterprise, while TSFE and B Investments hold the residual stake. The initial capital injection for this nascent entity is set at EGP 1.2bn.