Orascom plans to demerger its business concerns

Nassef Sawiris says there was no 'rationale to justify the relationship' (Getty Images)

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Orascom Construction Industries, Egypt’s biggest listed company by market capitalisation, is to separate its construction and fertiliser business into two concerns trading separately in Egypt and abroad.

A new company will be formed to hold the construction business in a demerger that Nassef Sawiris, chairman and chief executive, said would provide "greater strategic clarity".

“It has been apparent to us that there is absolutely no rationale to justify the relationship between the fertilizer business [which exports to Europe, North America and Brazil], and the construction group which [specialises in infrastructure and] works predominantly in emerging markets,” he explained.

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Sawiris argued that the fundamentals of the two businesses were so different, the combination was acting as an "unnecessary poison pill", adding that it was potentially inhibiting investors and merger partners interested in only one side of the business.

Ahmed Shamsi, an analyst at EFG-Hermes, the regional investment bank, said the move would "open up all sorts of opportunities" for the company, and would enhance its appeal for mergers and acquisitions on both the fertiliser and construction side.

He said that the construction business had a strong and almost debt-free balance sheet (post a $2bn refinancing for the fertiliser arm), which would help its valuation after the separation, and which could also make it an attractive merger and acquisition partner.