UPDATE 1-Egypt sets limits on share transfers of local stocks

Mon Mar 4, 2013 10:26am EST

* Analyst sees link between ruling and share transfer deal

* OCI CEO banned from travel in tax evasion probe

* Egypt bourse slips to two-month low on travel ban news (Adds OCI statement on tax claim)

By Asma Alsharif

CAIRO, March 4 (Reuters) - Egypt has set limits on the amount of shares local companies can transfer into internationally-traded global depository receipts after a controversial deal involving one of the country's biggest firms.

Egypt's financial watchdog made the ruling while a dispute rages over a share offer that is likely to lead to Orascom Construction Industries (OCI) leaving the Egyptian stock market against the government's wishes.

On Sunday Egypt's public prosecutor barred the chief executive of the company and his father from leaving the country as part of an investigation into suspected tax evasion.

"There are new regulations that were set in place by the authority to impose a limit to the (number) of local shares that can be changed into GDR certificates," an official from the Egyptian Financial Supervisory Authority (EFSA) told Reuters on Monday.

The amount transferred into GDRs, which foreign investors often use to invest in companies based in emerging markets, must not exceed a third of the company's capital, the official said, requesting anonymity.

Under the ruling, which came into force on Sunday, firms must also obtain approval from an extraordinary shareholders' meeting before they can make the transaction.

"This is in order to prevent a (future) replication of the case of OCI ... so no one can make any acquisitions or tender offers on GDRs except through the local market and through EFSA so that it can have control over any transaction," said Mona Elshazly, an equities analyst at Pharos Securities.

TRAVEL BAN

Dutch-listed parent company OCI NV, a fertiliser and construction firm, announced a deal in January under which holders of OCI's GDRs were offered shares in OCI NV, while holders of the firm's Egypt-listed ordinary shares got the option of cash or OCI NV shares.

If enough shareholders of the Egyptian-listed company accepted either of the two options, this would lead to its departure form the local bourse.

OCI CEO Nassef Sawiris and his father Onsi were barred from leaving the country and placed on an arrivals watch list on Sunday as part of an investigation into alleged tax evasion related to the 2007 sale of an OCI subsidiary to France's Lafarge, state media reported.

Sources close to the Sawiris family said the chief executive and his father were out of the country. Under the order, they would be detained if they returned.

State news agency MENA said the investigation was into charges they evaded about 14 billion Egyptian pounds ($2.1 billion) of taxes from the sale.

OCI said in a statement that it had received a demand from tax authorities for 4.7 billion pounds, which it was appealing against, but had not received any notification about additional tax demands or about the travel bans.

Egypt's bourse fell to a two-month low on news of the travel ban, which traders said struck a fresh blow to investor confidence in the country.

OCI, which is seeking to improve its ability to fund global expansion with international capital, obtained board approval for its acquisition in February but EFSA delayed its completion after requesting more information.

In a separate development on Monday, Egypt's Palm Hills Developments Company said OCI signed a 400 million Egyptian pound deal to provide it with construction work. (Additional reporting by Alexander Dziadosz and Ehab Farouk; Editing by David Stamp and Ruth Pitchford)

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