UAE’s Global Investment Holding Co. has agreed to buy a 30% stake in Eastern Co. (EAST.CA), Egypt’s main tobacco products maker, for $625 million, a measure that will widen private participation in the economy, Egypt’s cabinet said on Sunday.
Last month, Egypt’s state-owned Holding Company for Chemical Industries, which held 50.95% of Eastern’s shares, said in a stock market disclosure it had received offers from foreign investors to buy up to half of its shares.
The sale will reduce Chemical Industries’ stake to 20.95%, giving impetus to Egypt’s floundering privatization program.
Global Investment will provide $150 million to buy the tobacco necessary for production as part of the agreement. It was not clear from the statement if this was an additional amount or was included in the $625 million purchase price.
Egyptian Prime Minister Mostafa Madbouly and the finance and public enterprise ministers attended a signing ceremony for the purchase.
The deal “is an affirmation of the government’s determination to … encourage direct private investment in various sectors,” the cabinet statement said.
Also, the Rassd News Network (RNN) tweeted on X, formerly Twitter, that: “The Council of Ministers announces the acquisition of 30% of the shares of the El-Sharqia(Eastern) Tobacco Corporation by the Emirati Global Investment Corporation, for $ 625 million, with the buyer providing $ 150 million to purchase the tobacco materials needed for manufacturing.”
Egypt’s government sold 4.5% of Eastern Co. on the stock exchange in 2019, leaving the holding company with a majority stake.
Egypt promised the International Monetary Fund it would roll back the state’s involvement in the economy and allow private companies a much greater role as part of a $3 billion, 46-month financial support package signed in December.
The IMF’s first review of the Extended Fund Facility, initially scheduled for around March, has yet to take place, partly the result of Egypt’s slow progress on asset sales.
Since then, a number of sales to foreign investors had been announced in principle, but few have been completed.
Egypt desperately needs foreign currency after the COVID pandemic and Ukraine crisis exposed vulnerabilities in its economy. The government is facing an increasingly tough repayment schedule after a borrowing spree over the past eight years quadrupled its foreign debt.
Eastern’s share price has risen by about 11.7% to 20.40 Egyptian pounds ($0.64) since news of the foreign offers was announced on Aug. 22.
On his Facebook account, Dr. Mourad Aly, CEO of the Associated Partners Group, commented on the deal also commented on the deal, raising suspicions about the “transparency in pricing, and the guarantees for the absence of corruption”.
He said: “The deal to sell 30% of the shares of the Eastern Tobacco Company to the United Arab Emirates pushes us to wonder once again about transparency in pricing, and the guarantees for absence of corruption in the sale of Egypt’s assets.
Selling profitable companies is not privatization as much as it is failure and a desperate attempt to pay off the accumulated debts and provide dollars in any way.”
