22nd Feb 2008 13:54
British American Tobacco PLC22 February 2008 British American Tobacco wins auction for Turkish state tobacco company assets British American Tobacco today confirmed it has won the auction for thecigarette business assets of Tekel, the Turkish state-owned tobacco company,with a bid of US$ 1.72 billion. The transaction is subject to approval by Turkey's Competition Board andratification by the Turkish Privatisation High Council. Signing and completionare expected later this year. On completion, the acquisition will elevate British American Tobacco's marketshare in Turkey to around 36 per cent from just over 7 per cent today. The assets principally comprise: • the rights to all Tekel's cigarette brands which in 2007 accounted for some 32 billion cigarettes sold - approximately 29 per cent of the market • six factories, with manufacturing already consolidated onto three sites, one of which is on a short lease, and • around two years' stock of tobacco leaf. British American Tobacco estimates that the assets being acquired generatedearnings before interest, tax, depreciation and amortisation of US$151 millionin 2007. The asset-only privatisation does not include employees. An announcement onemployment by British American Tobacco is planned nearer to the completion ofthe transaction, after dialogue with employees and unions. Paul Adams, British American Tobacco's Chief Executive, said: "This investment,coupled with the country's rapid economic growth, will transform our position inthe world's eighth largest cigarette market. "The strength of Tekel's portfolio combined with our existing brands willprovide a stronger platform for the growth in the market of our internationalbrands, including Kent, Pall Mall and Vogue." Annual synergies of around £30 million by the third full year are estimated forthe enlarged business, driven largely by improvements in the supply chain andsavings in administrative costs. To achieve this there will be one-off costs ofup to £50 million in 2008, subject to finalisation of integration plans.However, significant cash will be realised from working capital improvements andasset disposals. The transaction, financed with a committed bank facility, is expected to beearnings enhancing from 2009 but also to result in a deferred tax charge ofapproximately £20 million, affecting adjusted diluted earnings per share in2008. Notes to editors • Approximately 110 billion cigarettes were consumed in Turkey in 2007 and around 38 per cent of adults smoke. • Tekel's leading brands include Tekel 2001 (a 13.7 per cent share in 2007) and Tekel 2000 (a 2.6 per cent share in 2007). • The six factory sites comprise: Istanbul (leased), Ballica Samsun and Tokat (all open) and Adana, Malatya and Bitlis (all dormant). • British American Tobacco is the world's second largest quoted tobacco group by global market share, with brands sold in more than 180 markets. Its subsidiary companies produced some 689 billion cigarettes through 52 cigarette factories in 44 countries in 2006 and employed more than 55,000 people. • British American Tobacco entered the Turkish market in 2002. Its head office is in Istanbul, its principal brands are Viceroy, Pall Mall and Kent and its factory in Tire-Izmir also exports to other markets in the region. • British American Tobacco is being advised by Deutsche Bank. Enquiries British American Tobacco Press OfficeDavid Betteridge / Kate Matrunola / Cat Armstrong+ (44) 0 20 7845 2888 (24 hours) Investor RelationsRalph Edmondson / Sharon Woodcock+44 (0) 20 7845 1180 / 1519 British American Tobacco Turkey, Corporate AffairsTuna Turagay +90 212 365 14 00 or +90 533 306 86 83Elif Boutlu +90 212 365 14 00 or +90 532 688 36 36 Telephone conference call Chief Executive Paul Adams and Finance Director Paul Rayner will host aconference call for analysts, institutional investors and UK journalists today.Dial +44 (0) 20 7081 9339 (password: BAT) a few minutes before 3pm (UK time). A replay will be available for 48 hours on +44 (0) 20 8196 1998, password 886050# and on the corporate website www.bat.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
British American Tobacco