UAE investment firm acquires 30% of Egyptian giant

In a move reflecting Egypt’s strategic push to divest state assets and bolster its foreign currency reserves amid a challenging economic landscape, a prominent UAE investment entity has secured a significant 30 per cent stake in Egypt’s largest tobacco manufacturer, Eastern Company, for a substantial sum of $625 million. This landmark acquisition by the UAE investment firm, known as Global Investment Holding, was officially confirmed by the Egyptian government.

Egypt’s strategy to shed state-owned assets and garner much-needed foreign currency has taken another substantial step with this sale of a substantial stake in Eastern Company. The nation, grappling with a persistent shortage of US dollars, views such divestments as critical to stabilising its fiscal situation.

Global Investment Holding, the buyer, has committed to injecting a substantial $150 million into Eastern Company, earmarked for the acquisition of essential raw materials used in the manufacturing process. Detailed specifics of this financial arrangement have not been disclosed by the parties involved.

This noteworthy transaction, announced over the weekend, follows a previous agreement reached in July, wherein Egypt engaged with a consortium of investors, including the Abu Dhabi-based holding company, ADQ, to divest stakes in several enterprises, amassing a substantial sum of $1.9 billion.

The broader context of Egypt’s economic reform agenda becomes apparent when revisiting the events of January the previous year, when the Egyptian government declared its intention to divest stakes in more than 30 state-affiliated companies. This endeavour forms a pivotal component of the nation’s overarching strategy to attract foreign currency and diminish the state’s influence in the economy, as stipulated in a $3 billion program inked with the International Monetary Fund in the preceding year.

Egypt’s economic narrative has been riddled with adversity over the past two years, grappling with an array of issues, including soaring inflation rates, a persistent shortage of foreign currency that has constricted imports, and a mounting foreign debt. The government in Cairo has attributed much of this economic turbulence to the ongoing global pandemic and the conflict in Ukraine.

To counter these challenges, the Egyptian authorities have devised unconventional means to bolster foreign currency reserves. These include offering citizenship in exchange for foreign capital and mandating that tourists utilise foreign currency for purchasing train tickets.

As part of this stake acquisition in Eastern Company, the state-owned Chemical Industries Holding will continue to retain a substantial 21 per cent stake in the enterprise. This move signifies a significant reduction from its previous stake of approximately 51 per cent.

In response to the pressing market demands and consumer grievances over product shortages, Eastern Company has announced a notable 15 per cent boost in production output, reaffirming its commitment to meeting consumer needs effectively.

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