Japan Tobacco International on Monday signed an agreement with Bangladesh’s Akij Group to acquire the tobacco business of Akij with a cost of $1.476 billion (Tk 12,430 crore).
JT International and Akij Group signed the deal at Akij House in Dhaka.
The deal is one of the biggest cross-border merger and acquisition transactions involving a Bangladeshi company.
The transaction is expected to be completed in the third quarter of the fiscal year 2018 following regulatory clearance, JTI said in a press release issued from both Tokyo and Dhaka.
Of the transaction amount, $1.09 billion or Tk 9,180 crore is for the outstanding shares and the remaining $386 million or Tk 3,250 crore is for trademarks and design rights.
In addition to the amount, there are transaction costs such as stamp duties worth $28 million or Tk 240 crore payable to Bangladesh tax authorities, it said.
United Dhaka Tobacco Co, a subsidiary of Akij Group, holds about 20 per cent share of the cigarette market in Bangladesh, the eighth largest cigarette market in the world, with volumes exceeding 86 billion units and growing by about 2 per cent year-on-year.
The deal will add about 17 billion units to the Japanese company’s sales volume, JTI said.
Akij currently occupies the 2nd position in both the value and base segments with brands such as Navy and Sheikh.
‘With this investment, we continue to accelerate our expansion in emerging markets that matter, a key component of the JT Group’s growth strategy,’ said JT Group executive vice-president, also president of tobacco business, Mutsuo Iwai.
He said that Akij’s substantial market share placed the group straight at the number two position in Bangladesh.
‘Bangladesh is one of the fastest growing economies in the world with a pro-business mindset, which is why we are keen to expand our presence in the country,’ said JTI president and chief executive officer Eddy Pirard.
‘The tobacco business of Akij is profitable, has state-of-the-art manufacturing facilities and a strong distribution network and workforce,’ he said.
JTI is a leading international tobacco company with operations in more than 130 countries. It manufactures and sells brands Winston, Camel, MEVIUS and LD.
JTI has been acquiring businesses in emerging markets where smoking is more prevalent following tighter smoking regulations in most areas around the world and declining demand in Japan.
The Tokyo-based company has spent more than $3 billion since last August, picking up companies in Russia, Indonesia and the Philippines.
JTI entered in Bangladesh market in 2015 with Winston cigarette and held 0.1 per cent market share as of 2017, according to the company’s estimates.
Bangladesh Investment Development Authority executive chairman Kazi M Aminul Islam, Eddy Pirard and JTI Bangladesh general manager Max Lobachev, Akij Group chairman SK Nasir Uddin, managing director SK Bashir Uddin and chief executive officer Shamsuddin Ahmed, and Standard Chartered Bank Bangladesh chief executive officer Naser Ezaz Bijoy were present, among others, at the deal signing ceremony.