Enterprise Chamber appoints two temporary directors at OCI

Orascom is a publicly listed company in Abu Dhabi that has the same majority shareholder as OCI. The temporary directors have, among other things, the task of ensuring that the proposed transaction does not disproportionately harm the interests of OCIs minority shareholders. These temporary directors decide whether the transaction with Orascom may be submitted to OCIs general meeting for approval. That approval is necessary to execute the transaction. 

In the proposed transaction, OCI sells its entire company to Orascom. Orascom pays the purchase price in Orascom shares. OCI then wants to distribute the Orascom shares as dividends to OCI shareholders, after which OCI ceases to exist. In short, OCI shareholders would receive Orascom shares in exchange for their OCI shares according to a certain exchange ratio.

A group of minority shareholders, including the VEB, believes the transaction disproportionately harms them. According to them, the transaction benefits the sole executive director of OCI, who (with some close family members) ultimately holds the majority of shares in both OCI and Orascom.

Their objections include that no synergy is expected from the merger of the two companies and that OCI has not properly handled the conflicting interests involved in the transaction.

They also state that the proposed exchange ratio of the shares is based on an undervaluation of OCI shares and an overvaluation of Orascom shares.

Moreover, they object to being forced to become shareholders in a completely different company, which is only listed in Abu Dhabi and Cairo. This would cause them various disadvantages.

Therefore, the minority shareholders have asked the Enterprise Chamber to take measures. They want to prevent the transaction from being executed in the short term. They have also asked the Enterprise Chamber to order an investigation into the matter.

The Enterprise Chamber handled the request to take measures urgently because OCI planned to bring a proposal for approval of the transaction to a vote at the general meeting on January 22. That approval was expected to be granted by the vote of the majority shareholder.

The Enterprise Chamber prohibits putting the proposal for approval of the transaction to a vote at the OCI general meeting on January 22 and appoints two temporary non-executive directors. They must assess whether the transaction has been prepared carefully enough. They must also assess whether the transaction disproportionately harms the interests of the minority shareholders. Ultimately, they can still submit the transaction, with or without amended conditions, to the general meeting for approval.

The Enterprise Chamber doubts whether the decision-making process has been careful enough. In particular, there is doubt whether OCIs non-executive directors have positioned themselves sufficiently independently from the sole executive director, who is also (indirectly) the majority shareholder. There are also indications that the minority shareholders may be disproportionately harmed by the proposed transaction compared to the majority shareholder.

Because OCI and the minority shareholders may suffer significant damage if the transaction proceeds, and that damage will be difficult to recover, the Enterprise Chamber grants the request to take measures. Conversely, the Enterprise Chamber considers it unlikely that OCI will suffer significant damage from those measures.

The names of the two temporary directors will be announced as soon as possible. The request to order an investigation at OCI will be handled by the Enterprise Chamber at a later time.