Qalaa Holdings, one of Egypt's largest investment companies, has approved a share swap with subsidiary companies that equates to a EGP1.7 billion ($223 million) capital increase, two informed sources told Reuters on Saturday.

The move would be the firm's third capital hike since it listed on the Egyptian bourse in 2010 and comes as the company considers a series of money-raising divestments as it seeks a return to profit.

The increase would involve exchanging shares in the holding company for larger stakes in subsidiary companies, mostly in the energy and cement sectors, and would bring the company's capital to EGP9.7 billion ($1.26 billion), the sources said, without giving any further detail.

"Qalaa's management decided that this will be the last increase," another source was quoted as saying by Reuters.

“With Egypt now on track for an economic recovery, the time is right to complete our transformation through the acquisition of additional stakes in the subsidiaries and business units that are best positioned to benefit from the upturn,” said Ahmed Heikal, chairman and founder of Qalaa Holdings.

“Further increasing Qalaa’s ownership in its core subsidiaries at attractive valuations will allow us to maximize earnings over the medium and long term,” said Qalaa co-founder and managing director Hisham El-Khazindar.

“Meanwhile, on the divestiture front, we are pushing forward with the disposal of selected assets. Liquidity generated from exits of these investments at the right time and right valuations will allow us to accelerate our deleveraging and derisking and will further strengthen Qalaa’s financial position.”

The proposed increase will see Qalaa Holdings issue up to an additional 340 million shares, of which 255 million would be common shares and 85 million preferred shares, bringing the total number of outstanding shares to 1.94 billion, of which 1.455 billion would be common and 485 million preferred.

“This will hasten our return to profitability during 2015, one year earlier than originally anticipated, and will open the way for dividend distribution in the coming years,” Heikal concluded.

On Wednesday the firm said it had hired investment bank EFG Hermes to advise it on the possible sale of its food businesses, a deal the conglomerate said would help it return to profit this year instead of 2016.

Qalaa, which is seeking to raise $300 million over the medium term through divestments, is considering selling confectioner Rashidi El-Mizan and dairy producer Dina Farms, Chairman Ahmed Heikal has said.

Qalaa has some $9.5 billion in assets under management, including dozens of firms mainly in Egypt, east and north Africa. – TradeArabia News Service and Reuters