UK. In a further consolidation of the tobacco sector, British American Tobacco is to acquire 100% of the cigarette businesses of Skandinavisk Tobakskompagni (Scandinavian Tobacco).
These include certain snus and roll-your-own-tobacco interests such as House of Prince in Denmark, J.L. Tiedemanns Tobaksfabrik in Norway and Fiedler & Lundgren in Sweden.
British American Tobacco will exchange its existing 32.35% stake in Skandinavisk Tobakskompagni at an agreed valuation of DKK 8,947 million (£904 million) and pay DKK 11,384 million (£1,151 million) in cash to settle the transaction.
The overall price, equivalent to DKK 20,331 million (£2,055 million), includes the buy-out by Skandinavisk Tobakskompagni of its snus joint venture partner.
On completion, the transaction will give British American Tobacco’s subsidiaries additional annual sales of approximately 30 billion cigarettes. Skandinavisk Tobakskompagni accounts for over 60% of cigarette sales in Scandinavia.
The company will benefit principally through market leadership in Denmark and Norway and approximately one-third of the Swedish market. It will also be elevated from fourth to second place in Poland with around one-third of sales.
Skandinavisk Tobakskompagni’s cigarettes are sold in around 40 markets. Prince, its premium brand, accounts for annual volumes of about seven billion cigarettes in 25 markets – the largest of which are in Scandinavia. Smaller markets include Germany, Greece and the Baltic states. It is a strong player in the travel retail channel.
The roll-your-own business to be acquired has sales equivalent to around two billion cigarettes a year. The acquisition of a 100% stake in Fiedler & Lundgren AB will strengthen British American Tobacco’s snus business and bring in-house manufacturing and additional expertise.
Fiedler & Lundgren sold almost 16 million tins of snus in 2006/07 with market shares of 6% in Sweden and 4% in Norway. Brands include Granit, Mocca and Metropol.
British American Tobacco estimated that the businesses to be acquired generated earnings (before interest, tax, depreciation and amortisation) of DKK 1,812 million (£183 million) in 2007.
Underlining the significance of the deal, British American Tobacco Chief Executive Paul Adams said: “This transaction turns our minority stake in a diversified business into full control of very profitable cigarette businesses with strong market positions.”
In addition, British American Tobacco anticipated that there could be significant operational efficiencies of approximately £60 million per year by 2011 and one-off cash costs of £115 million.
The transaction, which is subject to approval by the European Commission, is being financed through a committed bank facility and is expected to be immediately earnings enhancing. Completion is anticipated later this year.
The gross assets of the businesses and interests which are being acquired are approximately DKK 6,700 million (£677 million) based on the year-end 30 June 2007 balance sheet published by Skandinavisk Tobakskompagni.
Any future proposals affecting employees would be subject to applicable information and consultation requirements. British American Tobacco is being advised by Deutsche Bank.
Skandinavisk Holdings, Skandinavisk Tobakskompagni’s controlling shareholder, will retain the cigar and pipe tobacco businesses, as well as roll-your-own and smokeless tobacco in Orlik Tobacco Company. It will also keep non-tobacco interests in the convenience goods trade and the Tivoli amusement park in Copenhagen.
ABOUT BRITISH AMERICAN TOBACCO
British American Tobacco is said to be the world’s second largest tobacco group by global market share, with brands sold in more than 180 markets. Its subsidiary companies produced some 684 billion cigarettes through 47 cigarette factories in 40 countries in 2007 and employed nearly 54,000 people.
Visit www.bat.com.
ABOUT SKANDINAVISK TOBAKSKOMPAGNI
Skandinavisk Tobakskompagni is said to be one of Denmark’s largest international companies. It is the parent company of several subsidiaries engaged in the production and sales of tobacco products, as well as the Danish convenience goods trade. It holds a significant stake in Tivoli. The Group employs approximately 12,000 people.
Visit www.st.dk.
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