MONGOLIA
Mongol Tobacco SO Co. Ltd. has announced a tender of a minimum of 19% of its company shares. Although a number of local investors have already expressed interest in a purchase, the company’s board apparently has turned them all down, preferring to offer the shares to an international entity instead.
“The share volume on offer comes from one of our local main shareholders, who has decided to sell his stake for private reasons,” explained Mongol Tobacco’s manager Tsogtsaikhan Otgontsetseg. Pending negotiations with an interested buyer, the company board is prepared to part with an even higher volume than the 19% already on tender, Otgontsetseg added.
Mongol Tobacco’s share equity is currently divided among a total of four investor entities, with 51% of the shares held by two subsidiaries of China Tobacco and the remaining 49% held by two private companies in Mongolia. “The individual tendering his stake of 19% is the owner of one of these two Mongolian companies,” Otgontsetseg clarified. Mongol Tobacco SO Co. Ltd. was established at the turn of the century and as of 2018, claims a domestic cigarette market share of 30%, making it the country’s market leader.
According to Otgontsetseg, a total of 65 cigarette brands are currently available in Mongolia, 13 of which are owned by Mongol Tobacco. The country’s best-selling brand is Mongol Tobacco’s Red Falcon. The company operates a fully-equipped manufacturing facility with a maximum production capacity of 2.5 billion sticks per annum. However, only half of this capacity is presently utilized, of which 91.2% is for the domestic market and 8.8% for contract manufacturing on behalf of overseas customers.
The company also maintains its own cigarette filter manufacturing plant, as well as a countrywide distribution and retailer network.
The Mongolian cigarette market currently has a turnover of 350,000 master cases per year, divided among all players. While Mongolia only has a comparatively limited legal framework concerning tobacco products in place, the government has recently embarked on a staggered excise tax increase scheme. In 2018, a 10% rise was implemented, while further 5% increases will be introduced in 2019 and then again in 2020. Parties interested in a possible share acquisition are requested to establish contact with Mongol Tobacco directly.