Tobacco giants open a new front
British American Tobacco (BAT) announced this week it will buy Turkey-based cigarette maker Tekel in a $1.7 billion deal. It beat out a Citigroup-led consortium s to win the company. Tekel is owned by the Turkish government.
This may sound like a small deal, but Turkey is actually the #8 cigarette market in the world. According to Bloomberg News, 60% of Turkish men smoke and the average consumption is 15 cigarettes a day, It's another case of expansion to cigarette markets in developing countries, even as smoking decline in the richer countries. The idea is that BAT will continue to sell the Turkish cigarette brands, but also get better distribution for its high-prestige wWestern brands.
The purchase bring BAT (makers of Kent, Dunhill, Pall Mall, and other brands) right up against its familiar rival, Philip Morris (Altria), which already has a solid position in the Turkish market, thanks to its Marlboro brand. Philip Morris has 41% market share in the country, while the new BAT-Tekel group will have 36% share.
The move is part of an international tobacco acquisition binge. In 2003, BAT acquired R,J, Reynolds. In 2006, Japan Tobacco Inc. bought the UK's Gallaher Group and the UK's Imperial Tobacco Group Plc bought Spain's Altadis. Altria bought US cigar maker John Middleton. The Bloomberg News article noted that state cigarette monopolies in Egypt and Algeria may soon be on the auction block.
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