Development Partners International, a UK private equity group, is to invest $35m in B.Tech, Egypt’s largest electronics and home appliances retailer, in a rare deal struck as the country is in the grip of a severe foreign currency crisis.
DPI, which specialises in investments in Africa, is acquiring a 33.3 per cent stake in the Egyptian retailer which has 67 stores selling appliances made by global brands to the middle class.
Despite the political and economic upheavals in Egypt since the 2011 revolution, sales of B.Tech, a family-owned group, have been growing at an annualised rate of 18 per cent, said DPI.
Foreign investors have been wary of Egypt in recent years, initially because of the instability and fast-paced political changes sparked by the revolution and more recently as a result of a foreign currency shortage exacerbated by the effect of terrorist attacks on the tourism industry.
The central bank has devalued the currency against the dollar by almost 13 per cent in March, but this has not killed off the black market where the US currency is trading at a premium of more than 25 per cent over the official rate. Analysts expect another devaluation.
Ahmed Ozalp, executive director of Arqaam, an investment bank, said: “There is still foreign investor interest but the FX problems have caused a lot of disruption.
“It has stopped some people from looking at deals in Egypt and it has disrupted certain late-stage deals because there is a differential between the official and the black market rate.”
Mr Ozalp said that beyond hydrocarbons and power, which receive the most foreign investment, sectors that attract foreign investor interest are consumer-driven ones such as food and beverage and healthcare.
Sofiane Lahmar, the deal partner at DPI, said his company had a “strong belief that B-Tech will grow strongly over the next five years which will more than offset any depreciation of the currency”.
He pointed to the expansion in housing and the annual increase in the number of marriages in this predominantly young country of 91m people as indicators of the strength of the market for household appliances.
Mr Lahmar said the DPI investment will come in the shape of a capital increase to fund expansion by opening more stores outside big cities, developing online sales and enhancing infrastructure such as warehousing.
Angus Blair, chief operating officer of Pharos Holding, an investment bank, said: “Consumer spending remains relatively buoyant compared to many other markets. There is a very low level of household indebtedness which means exceptionally high levels of household liquidity.” Source: FT