VZCZCXYZ0010
RR RUEHWEB

DE RUEHEG #3470 3461644
ZNR UUUUU ZZH
R 121644Z DEC 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 7712
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0363

UNCLAS CAIRO 003470 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA 
USAID FOR ANE/MEA MCCLOUD AND RILEY 
TREASURY FOR MATHIASON AND HIRSON 
COMMERCE FOR 4520/ITA/ANESA/OBERG 
 
E.O. 12958:  N/A 
TAGS: PGOV ECON EG
SUBJECT:  Lafarge takes a chunk of Egyptian cement 
 
 
¶1.  (U) Orascom Construction Industries (OCI) signed an agreement 
December 10 to sell its Cement Group to France's Lafarge for 8.8 
billion ($12.9 billion).  Lafarge will also assume $2 billion of 
OCI's debt, bringing the total value of the agreement to $14.9 
billion.  Orascom Cement, with 10 plants operating in 9 countries in 
the Middle East, North Africa and Turkey, a production capacity of 
35 million tons/year and annual sales of $2.6 billion, is the 
largest cement producer in the Mediterranean Basin.  Lafarge claims 
to be the world's No. 1 cement producer. 
 
¶2.  (U) OCI management announced it intends to make an extraordinary 
dividend payment of $11 billion (#E302/share) to shareholders in 
early 2008.  An additional $2 billion of the revenues from the sale 
will be used to pay down OCI's overall debt.  The remainder will be 
invested in OCI's on-going construction projects, new infrastructure 
projects and natural gas-driven industries.  Nassef Sawiris, owner 
of OCI, will hold 11.4% of Lafarge, making OCI one of the largest 
shareholders of Lafarge.  The Sawiris family will get two seats on 
Lafarge's board. 
 
¶3.  (U) The Cairo and Alexandria Stock Exchange (CASE) took an 
initial downward turn on news of the cement sale.  On December 10 
the benchmark CASE Index lost 2.7% on turnover of #E1,982 million 
($358 million).  OCI shares closed at #E521.00, a decrease of 1.9%, 
on turnover of #E561.8 ($104 million), or 28% of total market 
turnover.  A few cement companies saw modest gains, with Misr Beni 
Suef Cement (partially owned by Lafarge) increasing 1.1% to 
#E121.31, Cement Qena gaining 0.7% to #P78.14, and Sinai Cement 
rising 0.1% to reach #E73.21.  The decline continued on December 11, 
with OCI shares declining a further 6.6% on a turnover of #E250.7 
million ($4.8 million), to close at #E499.12.  OCI rallied 
significantly on December 12, climbing 5.0% to #E525.05, trading a 
total value of #E544 million ($100 million), the highest turnover in 
the day's session. 
 
¶4.  (U) Local analysts believe OCI will move aggressively into the 
natural gas sector, aiming to replicate its success in the cement 
sector.  Ahmed Shams El Din, a researcher at EFG-Hermes, told us OCI 
most likely sold the Cement Group - its core business - in part 
because of GOE plans to end energy subsidies for industry.  Using 
revenues from sale of the Cement Group, OCI can move into the 
natural gas sector and position itself to as a key player in natural 
gas and construction, the two sectors leading Egypt's current 
economic growth. 
 
¶5.  (U) Comment:  Once considered a "strategic" industry off limits 
to foreign ownership, Egypt's cement sector now has a large foreign 
presence.  Lafarge and the Greek firm Titan own a combined 76% of 
Misr Beni Suef Cement.  Ciments Francais, a subsidiary of 
Italcimenti, owns 54% of Suez Cement.  The Orascom Cement sale 
signals continued investor confidence in Egypt's economic recovery. 
The Sawiris family's presence on the Lafarge board also highlights 
Orascom's strategic expansion into the global economy.  With Orascom 
Telecom's investments in Italy's Wind Telecom and Greece's WIND 
Hellas, the Lafarge deal solidifies Orascom as a major multinational 
firm, no longer dependent on Egypt's economy alone. 
RICCIARDONE