Cairo - Mubasher: MubasherTrade Research is recommending Buy with “Low Risk” on the stock of Sixth of October Development and Investment Company (SODIC) with a price target (PT) of EGP 33.5 per share.
SODIC announced that its board of directors has agreed to launch a mandatory tender offer (MTO) on the shares of Madinet Nasr for Housing and Development (MNHD) through a direct share swap.
This will allow MNHD to remain listed on the Egyptian Exchange (EGX).
The swap ratio is preliminarily set at 2 shares of MNHD for one share of SODIC, provided that SODIC acquires a percentage not less than 51% of MNHD's shares.
The declared acquisition will be conducted through direct equity swap only.
The new SODIC will be comprising the two entities old SODIC and MNHD based on the stake that will be acquired by SODIC which will range from 51% to 100%, if the MTO has been accepted by MNHD.
The current shareholders of SODIC will benefit from the potential financial synergies that will result from converting two big competing entities into a new big and integrated real estate developer, according to a report by MubasherTrade Research on Wednesday.
SODIC will not resort to a normal way of capital increase but rather it will issue new shares certificates only for the shareholders of the target company who will have to decide whether to accept or reject the Mandatory Tender Offer (MTO) based on the declared ratio, they will have their shares of MNHD converted into shares of SODIC.
The current shareholders of SODIC should not suffer any dilution as the targeted company will be consolidated with SODIC.
