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Gov. withdraws from tobacco business

Gov. withdraws from tobacco business

  • Japanese conglomerate pays USD 434 million for 30 percent acquisition

The Government of Ethiopia has decided to transfer its last remaining 30 percent stake in the National Tobacco Enterprise SC to the Japanese tobacco giant, Japan Tobacco International (JTI), at a total cost of USD 434 million.

The multinational tobacco company, JTI, on Thursday announced that it has signed a share purchase agreement with the Ethiopian government for approximately 30 percent of the total shares, bringing JTI’s share ownership to 70.95 percent of the total number of NTE shares.

The purchase agreement was signed by Girma Amente, the Minister of Public Enterprises, and Francois Fidenza and Christopher Hill, representatives of JTI.   

In July 2016, JTI, the owner and marketer of Camel and Winston cigarettes outside the US, acquired 40 percent of the NTE from the Ethiopian government for USD 510 million, the highest sale in the history of privatization in Ethiopia.

“This significant increase in our ownership of NTE shares reaffirms our strong belief in the company and Ethiopia as an increasingly important place to do business in Africa,” Eddy Pirard, president and CEO of JTI, said. “By combining our international and newly acquired local expertise, we are confident that we can take NTE to a new level of growth.”

Since acquiring 40 percent of NTE’s shares last year, JTI, as the largest shareholder, has been contributing to NTE’s growth by leveraging its international experience in the tobacco business.

“We would like to express our sincere gratitude towards the Government of Ethiopia for their trust and for their efficient collaboration in finalizing this transaction,” Pirard said.

Getu Alemayehu, communications director at NTE, told The Reporter that the Enterprise wants to take over the 44 percent tobacco supply, which they believe comes from illegal trade.

“Currently, our company only has 56 percent share of the tobacco market in Ethiopia,” Getu said.

“We specifically want to focus on the eastern part of Ethiopia’s market, which source 90 percent of its supply from contraband trade,” he said.

In that regard, the Enterprise’s aim is to turn the illegal market into a legal one and benefit from it.

After the latest acquisition, the government would be totally out of the tobacco business.

“We have been in negotiations with the company to sell our stake at NTE,” Wondafrash Assefa,” communications director at the Ministry of Public Enterprise told The Reporter.

“The government is no longer interested in continuing to involve in the company,” he said.

Japan Tobacco International is a leading international tobacco products manufacturer. Its products are sold in over 120 countries and its globally recognized brands include Winston, Camel, Mevius, LD and Natural American Spirit. With diversified operations, JTI is also actively present in pharmaceuticals and processed foods industries. The company’s revenue was USD 19.7 billion in the fiscal year ended December 31, 2016.

The National Tobacco Enterprise SC was first established in 1942 as the Imperial Ethiopian Tobacco Monopoly. National Tobacco Enterprise SC was first privatized in 2008 when 22 percent of its shares were sold to a Yemeni company, Sheba Ethiopia Investment PLC, for USD 35 million. Later Sheba raised its stake to 29.05 percent.

NTE makes filtered brands such as Nyala, Nyala Premium, Delight and Elleni. The non-filtered brand of the company is called Gissilla.

The Enterprise also imports and distributes Rothmans and Marlboro, produced in the UK and US, respectively.

Out of the local brands, Nyala Premium and Delight, packed in a hard box, are the company’s premium brands; the cheaper brands are packed in soft boxes.

Following the latest transaction, the Ethiopian government has fully withdrawn from the tobacco monopoly business. While Sheba Ethiopia maintains its minority 29.05 percent shares.