Unnamed investor buys out workers’ stake in tobacco giant Eastern Company after monthslong conflict

Share-holding workers  at partially state-owned tobacco firm Eastern Company were bought out on Thursday following months of conflict over the sale.

The bid accepted by the share-holding workers’ union for over five percent of the company was submitted by EFG Hermes Investment Banking on behalf of an undisclosed client, according to two sources, one of whom is a member of the union’s board.

The deal concludes tensions over the sale, which began earlier this year, and effectively eliminates one of the last remaining influential unions. Worker opposition to the sale over recent months was met with intimidation and punitive action. 

The buy-up valued the workers’ shares at just under LE38 each, a marginal increase on previous offers that workers had rejected during the first half of the year. 

The workers’ union held over 156 million shares — roughly 5.2 percent of the company, according to Eastern Company’s April disclosure.

Workers had voted against an initial lowball bid to sell all union-held shares to a single, anonymous buyer represented by EFG Hermes Promoting and Underwriting in February.

MP Ehab Mansour would later claim that the bid was undervalued by around LE10 billion.

After workers protested against the motion during the February shareholders’ general assembly, management launched investigations into 25 union-affiliated workers. Several workers told Mada Masr they believe the company used the investigations as a means to intimidate them into approving the sale in a later meeting.

Some also said they were pressured to stay away from future meetings in exchange for a halt to disciplinary proceedings against them.

But when a second vote on the same sale was held in April, workers rejected the deal again. 

Union member Mohamed Mostafa told Mada Masr he filed complaints with the Financial Regulatory Authority in June contesting the low valuation and the high costs incurred from the February and April assemblies.

Later the same month, six more workers were investigated and their social insurance files were closed without notice, effectively terminating their employment. Two of them told Mada Masr they were barred from entering the company two months earlier despite never signing official employment termination forms.

The bid approval vote on Thursday was passed by a show of hands. It was conducted without judicial oversight, an option sought at earlier meetings this year to “ensure transparency,” according to a board member who refused to explain the reason behind the lack of judicial supervision this time. 

Legal statutes don’t require judicial supervision, the source said, requesting that he be “spared the question,” since “the country can’t take it right now.” 

Eastern Company is one of the only state-owned companies that have been partially privatized in line with recommendations from international lenders that the government lessen its footprint in the economy. 

The largest stake, 30 percent, is held by United Arab Emirates-based Global Investments LLC , followed by the state-owned Chemical Industries Holding Company, which owns 20.95 percent.