Two international cigarette companies are competing to buy a stake in Eastern Company, the largest cigarette manufacturer in Egypt.
The Holding Company for Chemical Industries, which owns 50.95% stake in Eastern Company, said in a disclosure on Tuesday that it had received several offers from foreign investors to buy a stake not exceeding 30% of its share in Eastern Company, and negotiations are underway to choose the best offer.
According to sources who spoke to Daily News Egypt, Japan Tobacco International (JTI) and United Tobacco Company, in which Philip Morris International controls the majority of its shares, submitted offers to obtain a stake in Eastern Company.
Whoever wins the deal, its market share will increase significantly, and it will also have a say in the process of manufacture and distribution in the local market.
If JTI seizes the stake, it will be represented on the board of directors of the United Tobacco Company and become a partner of its fierce competitor.
This comes after a bitter struggle between the two companies over the only licence offered by the government to manufacture cigarettes in Egypt outside Eastern Company, which was won by Philip Morris.
Eastern Company owns about 24% of United Tobacco Company, and is represented on its board of directors.
The sources indicated that the share that United Tobacco Company aims to acquire in Eastern Company amounts to about 33%, but after deducting the share of Eastern Company, it will be less than 30%.
The sources told Daily News Egypt that there is also another bid from a company in the Arab Gulf region.
The Holding Company for Chemical Industries said that this comes within the framework of the state’s IPO programme that aims to stimulate trading on the Egyptian Exchange and enhance investment opportunities.
The ownership structure of the Eastern Company is divided as follows: the Holding Company for Chemical Industries (51%), Allan Gray investment fund (7.2%), and the Shareholders Union (5.2%), while the remaining shares are traded on the Egyptian Exchange.
Eastern Company achieved strong financial and operational performance in the first nine months of the last fiscal year, and achieved profits amounting to EGP 5.29bn, during the period from July 2022 to March 2023, compared to EGP 4.25bn in the comparative period of the previous fiscal year.
The company’s revenues rose during the period to EGP 14.6bn, compared to EGP 12.78bn in the comparative period of the previous fiscal year, with a growth rate of 14%.
Philip Morris and Japan Tobacco Industry are the only foreign manufacturers in Egypt, after the exit of British American Tobacco from the Egyptian market last year, due to the lack of economic feasibility, according to the company’s statement at the time.
