Egypt completes first  foreign sale of a major state asset

The Egyptian government has completed its first foreign sale of a major state asset since entering into a privatisation program with the International Monetary Fund (IMF) in December. The government sold a 30% stake in Eastern Company, Egypt’s largest tobacco product maker and distributor, to the UAE’s Global Investment Holding Co. for 16.40 billion Egyptian pounds ($531.60 million), or 24.51 pounds per share. Global Investment acquired the stake from the state-owned Holding Company for Chemical Industries, reducing the government’s stake in Eastern to 20.95%.

The sale is part of Egypt’s broader privatisation program agreed upon with the IMF, aiming to privatise significant state assets and boost foreign direct investment. This transaction represents one of the largest minority stake sales in Egypt’s history and one of the biggest foreign direct investment (FDI) transactions in the country in recent years.

EFG Hermes, the investment bank, advised on the transaction. Maged El Ayouti, managing director and deputy head of investment banking at EFG Hermes, noted that the deal has “far-reaching positive implications” for both Eastern Company and the Egyptian economy.

This move follows Egypt’s sale of a 9.5% stake in state-controlled Telecom Egypt in May 2023, signalling the government’s commitment to its reform program with the IMF. The privatisation efforts aim to strengthen the Egyptian economy, increase exports, and attract more foreign direct investment.

The context of economic challenges, including capital flight and increased import bills following Russia’s invasion of Ukraine, has underscored the importance of implementing reforms and attracting foreign investment for Egypt’s economic resilience. The country, being the world’s largest importer of wheat, faced disruptions in its wheat and grain supplies due to the conflict in Ukraine. The government’s privatisation program is a key element in its strategy to address economic vulnerabilities and boost growth.