UPDATE 1-Egypt's OCI to pay $1 bln to settle tax dispute

Tue Apr 30, 2013 10:00am EDT

(Adds Dutch parent's plan to tender for OCI shares, background, quotes)

CAIRO, April 30 (Reuters) - Egypt's Orascom Construction Industries (OCI) said on Tuesday the tax authority had exonerated it of wrongdoing after it agreed to pay 7.1 billion Egyptian pounds ($1.02 billion) to resolve a tax dispute.

The settlement with the Egyptian Tax Authority (ETA) should pave the way for OCI to go ahead with a plan for its Dutch-listed parent company to publicly tender for OCI shares listed on the Egyptian stock exchange, OCI said.

Egyptian authorities had been investigating claims the company failed to pay some 14 billion pounds of taxes on the 2007 sale of Orascom Building, an OCI subsidiary, to French firm Lafarge.

OCI said it had agreed to pay the 7.1 billion pounds in 10 installments over five years.

Authorities had also lifted a travel ban on the firm's chief executive officer, Nassef Sawiris, and his father, which the government imposed in March as part of the investigation, it added.

"The settlement amount was reached following months of challenging negotiations," OCI said in a emailed statement.

"In conjunction with this agreement, the ETA has determined that there was no tax evasion by the company and is exonerating management and the company from any wrongdoing related to the transaction."

Dutch-listed parent company OCI NV announced an acquisition deal in January under which holders of OCI's GDRs (global depositary receipts) 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.

The deal might lead OCI to leave the Egyptian exchange.

Egyptian Finance Minister Al-Mursi Al-Sayed Hegazy told a news conference earlier on Tuesday there were no negotiations under way with the firm over the dispute and that the issue had been referred to the public prosecutor.

The prosecutor dropped the tax evasion case soon after receiving it, a source with knowledge of the issue said.

($1 = 6.9343 Egyptian pounds) (Reporting by Ehab Farouk; writing by Maggie Fick and Patrick Werr; Editing by James Jukwey and Mark Potter)