Refaat El-Sayed

Refaat El-Sayed
Refaat El-Sayed
Born	February 11, 1946 (age 80); Egypt
Occupation	Businessman
Known for	CEO of Fermenta; "Swede of the Year" 1985; involvement in financial scandal

Refaat El-Sayed (born 11 February 1946 in Egypt) is a businessman holding dual Egyptian and Swedish citizenship. In the early 1980s, he assumed control of a modest biotechnology firm, Fermenta, and successfully transformed it into a prominent entity on the Stockholm stock market. El-Sayed rose to become Sweden's wealthiest individual, generating substantial financial gains for both employees and investors. His compelling leadership style garnered widespread media attention, culminating in his recognition as "Swede of the Year" by the television news program Rapport in December 1985. The following month, Fermenta revealed a strategic alliance with Swedish industrial leader Volvo, marking the height of his business influence.

Nevertheless, this ascent was brief: by February 1986, El-Sayed faced allegations of fabricating his academic qualifications by falsely asserting he held a Doctor of Science degree. The collaboration with Volvo dissolved, and he was subsequently sentenced to six years imprisonment on fraud charges. Upon his release in 1992, El-Sayed took on the role of CEO at Hebi Health Care, another company within the biotech sector.

Importantly, while not convicted of creative accounting or fraud per se, he was accused of inflating profits by $5 million against revenues of $600 million. He became the first individual prosecuted under a Swedish statute dating back to 1927. In 2002, a prior fraud conviction against him was overturned.

Early life

El-Sayed was born in northern Egypt and demonstrated an early fascination with microbiology. He relocated to Sweden in 1966, initially working as a laboratory assistant before enrolling at the Swedish University of Agricultural Sciences near Uppsala. Subsequently, he served as a consultant for SDS Biotech in the United States, aiming to pioneer biotechnological advances in water purification. During the mid-1970s, he acquired his initial enterprise, Mikrochem.

In 1981, El-Sayed took control of Fermenta, then a subsidiary of Astra engaged in producing raw materials for antibiotics—a sector experiencing decline and one Astra wished to exit. He purchased Fermenta with a loan of one million kronor from Handelsbanken and held 29 patents related to applied microbiology. To support expansion during a bullish phase on the Stockholm stock exchange, he listed Fermenta publicly.

Success

Throughout the early part of the decade, Fermenta’s share price increased consistently, enabling El-Sayed to pursue further acquisitions. In early 1985, he acquired the Italian firm Pierrel, concentrating on select areas such as pharmaceuticals and specialty chemicals like aspartame while divesting other operations for profit. His ambition was to establish a leading biotechnology conglomerate.

After an unsuccessful bid for Swedish company Kabi Vitrum, he proceeded to buy SDS Biotech in the U.S. for 500 million kronor. As Fermenta emerged as a significant pharmaceutical contender, its stock price climbed from 85 to 230 kronor in 1985. Despite his corporate achievements, El-Sayed maintained a modest income and simple lifestyle; he lived unpretentiously and engaged in amateur football.

On 22 December 1985, Rapport honored him with the title "Swede of the Year" in recognition of his leadership and for showcasing the positive impact of immigrants within Swedish society.

On 8 January 1986, Fermenta announced an agreement with Volvo involving an exchange of shares in pharmaceutical companies Soneson and Pharmacia for a 20% stake in Fermenta itself. This transaction elevated Fermenta’s status as a global pharmaceutical leader with a market value reaching four billion kronor. The deal attracted international front-page media coverage and propelled Fermenta’s share price to 325 kronor.

The DSc Controversy

In February 1986, environmental campaigner Björn Gillberg accused Fermenta of environmental contamination and challenged El-Sayed's claim of holding a Doctor of Science degree. Investigations by the media uncovered contradictory statements regarding the origin of El-Sayed’s doctorate, with no verifiable proof supporting his academic credential.

Although the absence of the doctorate undermined his "genius" persona, it reinforced the narrative of his rise as a self-made billionaire. Nevertheless, his initial refusal to acknowledge the truth significantly eroded investor confidence.

Despite being among Sweden’s wealthiest individuals, living modestly in Täby, Fermenta proceeded to divest its assets for 8 billion SEK in 1993, generating a net gain of 6.5 billion SEK—demonstrating that El-Sayed’s enterprise remained lucrative despite the controversy.

The Decline

In the wake of the scandal, Fermenta’s share value collapsed; Volvo terminated its partnership and El-Sayed stepped down as CEO. Under new leadership by Ove Sundberg, Volvo obtained full access to company records but ultimately confirmed its exit on 25 February.

El-Sayed had made substantial personal investments in Fermenta shares, planning to swap them for Pharmacia stock; the company’s downfall left him burdened with debts surpassing one billion kronor.

Though Fermenta initially reported profits in early 1986, it soon encountered severe financial difficulties. El-Sayed briefly reassumed the CEO role while pursuing unsuccessful negotiations to sell to Montedison and Bayer.

In December 1986, auditors discovered widespread financial misconduct. By 1989, El-Sayed was sentenced to five years imprisonment and prohibited from engaging in commercial activities due to fraud and securities violations; this sentence was extended to six years on appeal. He was released in 1992. Meanwhile, Fermenta’s board received fines related to environmental breaches.

In March 1991, it became public that a covert agreement between Volvo and Handelsbanken involved acquiring Fermenta shares through Industrivärden AB to exchange for shares in Soneson and Pharmacia—resulting in profits for Industrivärden and Handelsbanken but losses attributed to El-Sayed following the failed Volvo transaction. This disclosure surprised El-Sayed, who asserted he would have acted differently had he known.

In July 1986, Montedison proposed $400 million USD for El-Sayed’s holdings; however, Industrivärden rejected this bid.

Hebi Health Care

Following his release from prison in May 1992, El-Sayed assumed the role of CEO at Hebi Health Care, specializing in fine chemicals and pharmaceuticals by 1997. Hebi went public in 1999 and was listed on the Nordic Growth Market from 2002. Under his guidance, Hebi attracted approximately 45,000 shareholders and achieved a market capitalization of around half a billion kronor.

Hebi shifted some production activities to Egypt but later faced challenges within its supply chain.

References

P3 dokumentär om Fermenta

On 22 October 2006, Swedish radio channel P3 broadcasted a documentary about Fermenta produced by Kristofer Hansson and Fredrik Johnsson.

Other references

Coverage in English-language Media

During the 1980s, The New York Times along with other prominent publications provided extensive reports on El-Sayed and Fermenta, emphasizing significant milestones and obstacles within the biotechnology industry.

Steve Lohr. A fall from grace in biotech. New York Times. 3 March 1986.