Qalaa raises EGP 3.87 billion to lift stake in Egyptian Refining

Shareholders of Qalaa Holdings approved a capital increase of EGP 3.87 billion to finance raising its stake in the Egyptian Refining Company to 27.1% from 13%, according to a disclosure to the Egyptian Exchange.

The extraordinary general assembly approved the increase yesterday, along with a study of the uses of the proceeds requested by the Financial Regulatory Authority. The increase aims to offer 773.5 million new shares at EGP 5 per share, split between 588.7 million ordinary shares and 184.9 million preferred shares, raising paid-in capital to EGP 25 billion from EGP 21.13 billion.

Qalaa is not buying the refining company's shares directly, but acquiring 55.4% of New Age Refining Holding, which in turn buys QPI Egypt at nominal value. QPI, the local holding company of QatarEnergy, holds an effective 25.4% stake in the Mostorod refinery, adding 14.1 percentage points of indirect exposure for Qalaa as the Qatari partner exits.

The increase also covers repayment of dues to Arab International Bank and other local creditors, and the execution of the first tranche of Qalaa's right to repurchase Taqa Arabia shares, an option it retained when it sold 20% of Taqa to the Armed Forces Service Authority for EGP 1.6 billion. Management wants to complete the increase and close the refining company deal before mid-December.

What do these terms mean?

Capital increase: Issuing new shares to shareholders to raise additional funds, which increases the number of shares and the size of capital.

Preferred shares: Shares that give the holder priority in dividend distributions or on liquidation, usually in exchange for restrictions on voting rights.

Nominal value: The book value recorded on a share at issuance, which may differ from its market price.

Holding company: A company that owns stakes in other companies and manages them, rather than carrying out industrial or commercial activity itself.