Egypt pushes privatization, sells tobacco company stake to UAE buyer
The Egyptian government has sold a stake in the tobacco products maker Eastern Company to the UAE’s Global Investment Holding Co., the first foreign sale of a major state asset since agreeing to a privatization program with the International Monetary Fund last December.
Hani Aman, CEO of Eastern, Egypt’s largest tobacco product maker and distributor, confirmed the sale to Reuters in a report published Thursday.
Global Investment bought 30%, or 669 million shares, of Eastern for 16.40 billion Egyptian pounds ($531.60 million), or 24.51 pounds per share. Eastern shares were trading around 27.60 on Thursday.
Egypt’s cabinet announced in September that Global Investment had agreed to buy a stake for $625 million, acquiring it from the state-owned Holding Company for Chemical Industries, which held 50.95% of Eastern's shares. The cabinet also said that Global Investment would provide $150 million to buy tobacco for production purposes. The government now has a 20.95% stake in Eastern following the sale.
The investment bank EFG Hermes advised on the transaction. Maged El Ayouti, managing director and deputy head of investment banking at EFG Hermes, said in a statement that the deal has “far-reaching positive implications” for both Eastern Company as well as the broader Egyptian economy.
“As one of the largest minority stake sales in Egypt’s history and one of the biggest FDI transactions in Egypt in the last several years, this deal reflects continued investors’ appetite for acquiring stakes in leading Egyptian corporates, whether these are in defensive sectors or in pursuit of high growth opportunities,” El Ayouti added.
The sale marks part of a sweeping privatization program being undertaken by the Egyptian government. In December 2022, Cairo reached an agreement with the IMF on a 46-month reform program tied to a $3 billion loan that would see Egypt privatize a huge amount of its state assets, boost exports and make changes to increase foreign direct investment.
On May 14, the Egyptian government sold a 9.5% stake in state-controlled Telecom Egypt (TE) for 3.75 billion pounds ($120 million). The sale mainly involved local investors.
After Russia invaded Ukraine in February 2022, Egypt was left in a vulnerable position economically, with capital flight to the tune of more than $40 billion and an increase in its import bill that weakened the state's finances, including foreign reserves.
Egypt is the world’s biggest importer of wheat, and much of its supply comes from the Black Sea region. The war brought wheat and grain exports to a temporary halt, and they have only resumed intermittently. Russia announced on July 17 that it was withdrawing from the deal struck to allow grain to safely leave Ukraine's Black Sea port of Odessa.