‘RJ’ deal: More than one objective

تم نشره في Wed 14 May / May 2014. 08:05 PM - آخر تعديل في Wed 14 May / May 2014. 08:05 PM

By Jumana Ghunaimat

There is a severe criticism emerging now-a-days about the story of former Lebanese Prime Minister Najib Mikati leaving the Royal Jordanian (RJ) Company; based on that the government is making concessions to him, and imposing pressure on the Social Security Investment Fund (SSIF) to sell equity stakes owned by some strategic partners.

What is said is that the government is seeking to gain Mikati’s approval, albeit at the expense of money of the Social Security (SS). Many rumors circulate about the large gains achieved by the Lebanese group owned by him, due to owning shares at the RJ.

Mikati seeks to sell its stake in RJ after long years of investment, during which the company suffered losses in a row; as a result of the global financial crisis, and the decline in the aviation industry.

The Lebanese investor paid, at the time the deal in the year 2008, 48 million dinars, at 3.2 dinars per share. Today, it is thinking of selling at one dinar per share, at the time when the share price in the market is 55 piaster, with the total value of the transaction does not exceed 10 million dinars, constituting about 16% of the share in the company.

Mikati 's intentions to sell coincided with a local approach to increase RJ’s capital, and increase the government's stake at it, which led the later to think of buying Mikati’s shares, after the Cabinet agreed to increase the company's capital by 50 million dinars.

The government’s strategic thinking is to increase its RJ shares to more than 70 %, as a focus on the national carrier. RJ is considered more important than other companies, making supporting it acceptable to preserve it as a sovereign company. This is not exceptional in the case of Jordan, but a policy pursued by many countries.

Mikati’s leaving, being an important investor managing group that’s capital is more than six billion dollars, is a matter that harms Jordan’s investment reputation at this sensitive time. Therefore, the government is seeking to keep his work within the kingdom. To achieve this goal, it made an offer to Mikati to replace his stake in RJ with shares in other companies.

The deal is a bit complicated, and has multi-faces to it; It is between RJ and Mikati on the one hand, and between the latter and the government, too, while also between the latter and the SSIF.

The idea is that the government buys from the SS shares it owns in other organizations, and then replace them with the Lebanese investor with his shares in RJ.

The offer seems acceptable by Mikati who has good relations with Jordan, and is keen to support. Therefore, he is currently considering a number of projects that he can enter in return for leaving RJ.

The list of projects that he is thinking of do not include strategic banking shares within the SS’s portfolio, including the Arab Bank, the Housing Bank, and the Jordan-Kuwaiti Bank, but it includes, cement companies, real estate, banks and small and medium-sized enterprises.

Mikati could have sold his shares to any party whatsoever, and he could have rejected the idea of ​​the swap and replacement. But such a scenario would threaten RJ, and exacerbate its problem.

What is happening at RJ is not a unprecedented; since the government has previously bought Kuwaiti investors’ stakes at the “Mutakamila”, to save the company that is responsible for transport in Amman.

A closer look at the linkage between RJ and the Mutakamila shows us that the transport sector still needs official custodianship.

Compared to the share price, and compared with the value of the deal based on the share owned, as well as in view of the numbers, and judging them, we can foresee two results. Firstly, the deal saves RJ, which is undergoing a large crisis. Secondly, the deal retains an important investor, who wants to keep his business in Jordan.

No harm in both results, as long as the stock swap deal does not harm the SS and its funds.

@jumanaghunaimat

 

This article is an edited translation from the Arabic edition.

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