British American Tobacco PLC (LSE: BATS) said it bought from from Rajawali Group and other shareholders an 85 percent stake in Indonesia's fourth largest cigarette maker PT Bentoel Internasional Investama Tbk for US$494 million.
BAT is paying Indonesian rupiah873 per share, a premium of 20 percent over Bentoel's closing price of IDR730 per share on June 15 2009. A public tender offer for the remaining shares will be announced in due course and is expected to be completed by the end of August 2009.
Assuming that all the shares are tendered, the overall transaction would value the whole of of Bentoel at approximately US$580 million.
John Daly, BAT’s Asia-Pacific director, said: “This transaction represents an excellent strategic opportunity to enter the very large and growing Indonesian kretek market and will provide a platform for future growth.”
Kretek - in contrast to so-called ‘white cigarettes - are cigarettes made with a blend of tobacco, cloves and flavourings. The kretek segment accounts for some 93 per cent of the Indonesian market.
In 2008 Bentoel sold 17.7 billion cigarettes, representing approximately 7 percent of the market.
Bentoel's earnings before interest, tax, depreciation and amortisation for the 12 months to March 31 2009 were US$53 million.
British American Tobacco's existing business, PT BAT Indonesia Tbk, has an approximate 2 percent market share and competes only in the white cigarettes market.