Pending general assembly approval: early retirement for 1,200, elimination of up to 24 branches
CAIRO: A negotiation committee appointed by the Trade Holding Company (THC) to finalize the sale of Omar Effendi to Anwal Group reported Tuesday an agreement has been reached for Anwal to pay LE 50 million in early retirement compensation for 1,200 workers. Anwal will also retain the right to release up to 600 more employees within the first three years after the purchase if deemed necessary.
According to the committee s report, Anwal commits to maintaining at least 58 of the retailer s 82 branches. Anwal Financial Advisor Magdi Tolba says no decisions have been made to close specific branches yet, while the company also plans to expand to more attractive locations. He adds 58 is a number that will allow Anwal to continue and develop the chain, as required by THC, while also maintaining profitability.
THC s general assembly will vote on the agreement Monday.
It is natural for any company the size of Omar Effendi with 6,000 employees to have excess labor, says Tolba. (We) are facing a big challenge. We are entering a public sector environment and we are trying to implement economically-sound measures.
The 1,200 workers to receive early retirement have already made voluntary requests to THC, both Tolba and THC maintain, and only Anwal will be responsible for payment as the new owner. Tolba says the company will also establish a LE 15 million training center for new and current employees, including management.
According to THC s report, Anwal has proposed a development plan that includes financial and administrative restructuring, modernizing branches and retraining of the company s workforce of 4,800 after downsizing.
Tolba says Anwal will only close lagging branches after giving each a fair chance to succeed in its market.
A basic economic principal is the biggest loss a company can endure is closing a store, says Tolba. Now there are branches that are struggling and we will do everything possible to make them profitable. At the same time, how can I, as a businessman, ignore a place like Sharm El-Sheikh? So we will be looking to add new stores.
Anwal s plan divides Omar Effendi s stores into three groups according to performance. Tolba says the company plans to modernize already well-performing stores, then use the resulting profits to finance the development of medium and poor-performing ones.
Tolba says modernization plans include bringing all branches up to European standards as far as service and quality of merchandise while taking into consideration the specific needs of customers served by the chain. A Mohandiseen store, for example, cannot be expected to place the same emphasis on traditional farmer s clothing as a Fayoum store, he says.
Tolba adds the public s negative outlook over how the new owner will handle the 150-year-old chain because of the associated downsizing is unjustified.
No one is going to be more motivated to reform and develop Omar Effendi than us, says Tolba. As owners, we will assume sole responsibility for everything. If this deal fails, who s going to pay for it? Will the banks forgive our loans? Will the employees concede their rights? I don t think so.
The pending deal is worth LE 965.4 million. THC is set to receive LE 655 million from Anwal in 30 days from contract signing. Anwal is also obligated to invest LE 200 million to modernize the retail chain within six years, in addition to paying early retirement sums.
Earlier this month, THC filed a claim to the Prosecutor General s Office against businessman Saeed El Hanash for delaying the deal with a false LE 2 billion offer. El Hanash has since filed a counterclaim, but no measures have been taken by the Prosecutor General to either side s favor.
Privatization of Omar Effendi now seems imminent after a decade of attempts, during which the highest offer received amounted to just LE 350 million. The chain recorded profits of LE 2 million for the first time in 2005 after five consecutive years of losses. Public criticism of the deal flared last summer after THC announced its preliminary approval of the Anwal offer despite the report of a valuation committee which priced the chain at more than LE 1 billion.
Anwal is a Riyadh-based women s and children s clothes retailer, operating more than 140 stores with a workforce of about 600 employees.
