Egypt annuls 1990s deal to sell state company

An Egyptian administrative court has ruled that the sale of a state-owned company more than 13 years ago was null and void, sparking fears that ownership of a large number of firms on the bourse may be in doubt, traders said on Sunday.
The ruling on Saturday said the state's sale of more than 50 percent of the shares of Nile Cotton Ginning Co in 1997 and 1998 violated a number of regulations and its shares were substantially undervalued at the time, court sources said.
The court ruled that all of the company's shares and assets must now be returned to the state. The ruling can be appealed. It is the latest in a series of court decisions that have challenged the privatisation of companies, rattling investor confidence already shaken by months of unrest since Hosni Mubarak was ousted in February.
Nile Cotton has a current market capitalisation of 347.1 million Egyptian pounds ($57.6 million), Reuters data showed. "The fact that this was almost 15 years after the sale raises concerns as to the length of time a transaction can be subject to challenges," Osama Mourad, chief executive of Arab Finance Brokerage.
The government of Prime Minister Kamal Ganzouri began selling shares in state companies in the mid-1990s after three decades of rigid government control of much of the economy.
Ganzouri, who left office in late 1999, was reappointed prime minister in November. Mourad said many of Nile Cotton's shares had been sold directly to the public in an initial public offering and other shares to investors in a private placement. Another 10 percent of the shares were allocated to a workers union.
Egypt's bourse suspended trade on the company's shares on Sunday pending more information. Its share price has fallen by more than half since Egypt's uprising began in January. The ruling can be appealed to the high administrative court, lawyers said. In one of the earlier rulings to annul state sales, an administrative court ordered in September the privatisation of two textile firms and an engineering company be annulled and the assets returned to state ownership.