PMI and JTI Compete to Buy Stake in Egypt’s Largest Cigarette Manufacturer

  Japan Tobacco International (JTI) and Philip Morris International (PMI) are competing to acquire a stake in Egypt's largest cigarette manufacturer, Eastern Company.

According to Daily News Egypt on August 24, JTI and PMI are both vying to purchase a stake in Eastern Company.

It is reported that the Egyptian Chemical Industries Holding Company owns 50.95% of Eastern Company. The company has revealed that it has received multiple offers from foreign investors wishing to purchase up to 30% of its stake in Eastern Company.

Currently, negotiations are underway regarding the price to select the best offer.

Insiders have disclosed that JTI and PMI's United Tobacco Company have submitted bids to acquire a stake in Eastern Company.

Whichever company wins will significantly increase its market share and influence the manufacturing and distribution processes in the local market.

If JTI acquires the stake, it will represent the board of United Tobacco Company and become a partner to its fierce competitor.

The Egyptian government had opened cigarette manufacturing licenses (excluding Eastern Company, which is state-owned), and ultimately PMI obtained this qualification. Subsequently, Philip Morris International announced that it would print the manufacturer name "United Tobacco Company (UTC) made in Egypt" on its product portfolio.

Eastern Company holds approximately 24% of United Tobacco Company and has a seat on its board. The insider noted that United Tobacco Company plans to acquire 33% of Eastern Company, but after deducting Eastern Company's stake, it will be less than 30%.

There is also another offer from the Gulf region.

The Chemical Industries Holding Company stated that this transaction is part of Egypt's national IPO plan, aimed at stimulating trading on the Egyptian Exchange and enhancing investment opportunities.

The ownership structure of Eastern Company is as follows: Chemical Industries Holding Company (51%), Allan Gray Investment Fund (7.2%), and shareholder alliance (5.2%), with the remaining shares traded on the Egyptian Exchange.

In the first nine months of the previous fiscal year (July 2022 to March 2023), Eastern Company achieved strong financial and operational performance, with profits of 5.29 billion Egyptian pounds (approximately 1.25 billion RMB), a 24% increase year-on-year. Its annual revenue was 14.6 billion Egyptian pounds (approximately 3.44 billion RMB), a growth rate of 14% compared to 12.78 billion Egyptian pounds (approximately 3 billion RMB) in the same period of the previous fiscal year.

In 2022, British American Tobacco (BAT) exited the Egyptian market due to a lack of economic viability.

References:    

[1] Philip Morris, JTI compete to buy stake in Eastern Company