Ethiopia’s Wonji Sugar up for privatization in a US$393m deal

ETHIOPIA – Ethiopian oldest sugar estate, Wonji Shoa Sugar Factory has started negotiations with the government to sell the company to a private buyer, Ethio-Sugar Manufacturing S.C in a deal valued at US$393.41 million (11 billion Br).

According to AddisFortune, Ethio-Sugar has written to the Ethiopian Sugar Corporation and the Office of the Prime Minister to provide it with priority preference to buy the Wonji factory.

Included in the acquisition bid are two factories run by Wonji Shoa Sugar Factory along with 12,800ha of sugarcane plantations.

Wonji Sugar has a production capacity of 6,250tn of cane a day, produces over 174,000tn of sugar a year and is cultivated by out-grower farmers organised under 32 associations.

It was constructed in 1951 by HVA Holland Company, a firm with a wide range of experience in agricultural and agro-industrial development.

The deal which will be scrutinized by the Corporation’s committee and the company’s board of directors, awaits final approval by the Public Enterprises Holding & Administration Agency, which oversees state-owned enterprises.

“The Corporation has received the request of the company to acquire the factory,” said Gashaw Aycheluhem, corporate communications executive officer of the Corporation.

Ethio Sugar expects to sell shares to individuals and international companies like HVA Holland Company to raise the necessary funds for the acquisition.

Ethio-Sugar Manufacturing expects to have 40,000 shareholders, of which 10,000 will be farmers and the remaining will be offered to employees of the company, local business people, the diaspora community and international companies.

The company said the shares have a par value of US$35.76 and a single shareholder can buy a minimum of 10 shares.

Negotiations have been initiated with the Commercial Bank of Ethiopia, Berhan International Bank, Cooperative Bank of Oromia and Awash Bank.

Ethio-Sugar, which was founded three months ago by 24 shareholders, expects to raise the full amount within six years.

With privatization, the company is expected to enhance efficiency and productivity as well as generate more income for the country through taxes and export.

While Ethiopia’s annual demand is more than six million quintals, seven local sugar factories are operational with an annual production capacity of four million quintals.

These include Wonji Shoa, Metehara, Fincha, Tendaho, Arjo Dediessa, Kessem and OmoKuraz Sugar Factory II.

According to reports, the country imported 414,587tn of sugar in the 2016/17 fiscal year.

Last month, a new sugar factory, Omo Kuraz III with a capacity of 8,000ql to 10,000ql of sugar a day under the Omo Kuraz project was inaugurated by Prime Minister Abiy Ahmed (PhD).

In early 2017, management of Hibir Sugar S.C had proposed to acquire the Wonji factory but the bid was rejected by shareholders.

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