Phillmore International & Japan Tobacco International compete to buy a stake in Egypt’s largest tobacco manufacturer

Two companies, Japan Tobacco International (JTI) and Philip Morris International (PMI), are vying to buy a stake in EasternCompany, Egypt’s largest tobacco manufacturer, Daily News Egypt reported on August 24th.

The Egyptian Chemical Holding Company reportedly owns 50.95% of EasternCompany. The company revealed that it has received a number of offers from overseas investors and wants to buy its stake in EasternCompany, not exceeding 30% of its equity.

Now, it is negotiating the price in order to choose the best price.

According to people familiar with the matter, JTI and UnitedTobaccoCompany, a subsidiary of PMI, have submitted prices and want to buy Oriental’s stake.

Whichever company wins, its market share will increase substantially and it will play a role in the manufacturing and distribution process in the local market.

Should JTI get a stake, it would represent United Tobacco at its general meeting and become a partner in its fierce competition.

The Egyptian government opened up tobacco manufacturing licenses (with the exception of Eastern Tobacco, which is a state-owned company), and PMI was eventually awarded the status. Subsequently, PMI announced a change in the manufacturer’s name printed on its product portfolio to “United Tobacco Company” (UTC) “Made in Egypt”.

Orient owns about 24% of the United Tobacco Company and holds a seat at its general meeting. Insiders noted that United Tobacco plans to obtain a 33% stake in Orient, but less than 30% after deducting Orient’s stake.

Insiders also said there is another price in the Arabian Gulf.

Chemical Holding said that the deal is part of the Egyptian IPO program, which aims to stimulate trading on the Egyptian bourse and increase investment opportunities.

Orient’s ownership structure is as follows: the Chemical Holding Company (51%), AllanGray Investment Fund (7.2%), and the Shareholders’ Alliance (5.2%), with other shares listed on the Egyptian Exchange.

Eastern achieved strong financial and operational results in the first nine months of the last financial year (July 2022 to March 2023), growing 24% year-on-year to reach EGP 5.29 billion (approximately RMB 1.25 billion). Compared to EGP 12.78 billion (approximately Rs. 3.44 billion) in the same period of the previous fiscal year, its annual revenue was EGP 14.6 billion (approximately Rs. 3 billion), a growth rate of 14%.

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