Japan Tobacco Makes $510 Million Top Bid for Ethiopia Monopolyby
Offer is double British American Tobacco’s 2nd-highest bid
Ethiopia had the world’s lowest rate of male smoking in 2012
Japan Tobacco Inc., the seller of Camel and Winston cigarettes outside the U.S., made the highest bid to acquire 40 percent of Ethiopia’s monopoly tobacco company, according to the government.
The $510 million offer to buy a stake in National Tobacco Enterprise was more than double the next highest bid of $230 million by British American Tobacco Plc, said Wondefrash Assefa, a spokesman for the Public Enterprises Ministry.
A decision is expected in the “coming weeks” followed by 120 days to negotiate, according to Eva Hoeffelman, media relations director for Tokyo-based Japan Tobacco.
The company’s bid is in line with its strategy of building up a presence in Africa and other emerging markets, she said in an e-mailed response on Monday.
“We believe in the value of NTE and its future profitability and we are confident that, if we are confirmed to have had the winning bid, we can replicate our successes in other African countries such as Tanzania and Sudan,” said Hoeffelman.
While hefty public investment has helped drive economic growth of more than 8 percent over the past five years in Ethiopia, economists and the International Monetary Fund have said the government should encourage more private-sector investment to keep the expansion going. State-run enterprises and “political ruling-party owned entities” still dominate the economic landscape, though many seek joint venture or equity partners.
NTE is the only company allowed to trade, manufacture or sell tobacco products in Ethiopia, which is Africa’s second-most populous nation with about 100 million people. It owns a factory in the capital, Addis Ababa, and four farms, according to its website.
In 2012, only 9 percent of Ethiopian men smoked, the lowest proportion in the world, compared to 49 percent in China, 26 percent in neighboring Kenya, and 21 percent in the U.S., according to World Bank data. A smoking ban in public places is being implemented in Ethiopia after legislation was passed in 2014, which could impact local tobacco sales.
The public enterprise established in 1942 started selling shares to investors in 1999, according to its website. NTE recorded sales of $17.4 million in the third quarter of the fiscal year that ended July 7, 2015, it said, without providing further information.
The government owns 71 percent of the company and Yemeni-owned Sheba Investment Group is the other major shareholder, Wondefrash said by phone from the capital on Monday.