SERBIA. British America Tobacco (BAT) and Philip Morris have succeeded in the two Serbian tobacco company privatisations this month, taking control of over 60% of the local market.
BAT has been confirmed by the Serbian Government as the winning bidder for a 67.8% holding in the Serbian tobacco company Duvanska Industria Vranje (DIV) at a price of €50 million (US$55 million). In the transaction BAT has committed to invest €24 million (US$26 million) in modernisation over two years.
In 2002, DIV manufactured and sold approximately 1.6 billion cigarettes, some 8% of the Serbian market. BAT’s other brands already account for around 13% of the local market, including Lucky Strike which is Serbia’s top-selling international cigarette brand.
But BAT was trumped last week in another separate bid by Philip Morris, part of Altria, which tabled €519 million (US$571 million) for control of the larger Duvanska Industrija Nis (DIN). In the contest for DIN, BAT was the third-placed bidder behind a Croatian tobacco group. In 2002, DIN controlled 60% of the Serbian market with output of 12.0 billion cigarettes.
The Government said a clampdown on cigarette smuggling, which thrived during President Milosevic’s turbulent rule, had contributed to a higher-than-expected price for stakes in the two tobacco companies.
“Offers like this show that Serbia has made an express journey from a smugglers’ paradise to an orderly market in only two and a half years,” Serbia’s Finance Minister Bozidar Djelic said as he announced the outcome of the tender process.
It is estimated that half of Serbia’s population are smokers. Typically a local brand costs €0.49 per pack of 20 for a local brand in the domestic market and €0.93 for a top international brand.
