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British-American Tobacco to buy Tekel for $1.72bnBritish-American Tobacco to buy Tekel for $1.72bn
Andrew Pentol
25-Feb-2008
The sale does not include Tekel’s duty-free arm, which operates border stores and outlets at Istanbul Atatürk airport
British-American Tobacco (BAT) has won the auction for the cigarette business assets of Turkish state-owned tobacco company Tekel with a bid of $1.72bn. The transaction is subject to approval by Turkey’s Competition Board and ratification by the Turkish Privatisation High Council.
If successful, the acquisition will increase BAT’s market share in Turkey from 7% to about 36%. The deal includes the rights to all Tekel cigarette brands—which generated sales of 32bn sticks and accounted for about 29% of the Turkish market in 2007—six factories and two years’ stock of tobacco leaf.
The privatisation does not include other parts of the business, such as the duty-free stores that Tekel operates at Turkey’s borders and at Istanbul Atatürkairport. BAT, which entered the Turkish market in 2002 and has an office in Istanbul, claims the assets it is acquiring generated earnings before interest, tax and depreciation of $151m in 2007. Annual synergies of about £30m ($58m) are expected by the third full year after the takeover due to improvements in the supply chain and savings in administrative costs.
BAT CEO Paul Adams said: “This investment, coupled with the country’s rapid economic growth, will transform our position in the world’s eighth-largest cigarette market. The strength of Tekel’s portfolio combined with our existing brands will provide a stronger platform for the growth in the market of our international brands including Kent, Pall Mall and Vogue.”
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