BAT in $452m swoop to buy Protabaco

 
City A.M. Reporter
BRITISH American Tobacco (BAT) said yesterday it had agreed to buy the privately owned Productora Tabacalera de Colombia, the second largest cigarette company in Colombia, for $452m (£277m).

The London-based second biggest cigarette maker in the world said the deal will elevate it to second from third place in Colombia, Latin America’s fourth largest cigarette market with total industry sales of around 17bn cigarettes in 2010.

“This investment will strengthen and complement our position in an important market and fill a strategic gap in our Americas region,” said Mark Cobben, BAT’s director for its Americas region in a statement.

Privately owned Protabaco sold 5.5bn cigarettes in 2010, accounting for almost one third of the domestic market.

Its biggest brand, Mustang, is the country’s second best selling cigarette with a market share of around 18 per cent. BAT itself sold 708bn cigarettes in 2010.

BAT said funding for the cash acquisition will be from the group’s existing resources.

The deal represents a multiple of 11.3 times Protabaco’s $40m domestic 2010 earnings before interest, tax, depreciation and amortisation (Ebitda) on net domestic revenues of $110m.

The company said the transaction is subject to competition authority approval and final confirmatory due diligence.

Last month, BAT posted a five per cent rise in first-quarter sales, boosted by pricing gains, but said volumes continued to soften and warned of challenging trading amid tough global economic conditions.

The company’s shares climbed 1.3 per cent to 2,717p after the deal was announced yesterday.

BAT, which has 200 brands worldwide, including Dunhill, Lucky Strike and Kent, was advised by investment bank Rothschild on the Protabaco deal.

One of the company’s key aims is to make acquisitions to grow across the globe.

ADVISER: ROTHSCHILD

ROBERTO PAIVA

ROTHSCHILD

ROBERTO Paiva, vice chairman of Rothschild Latin America and a board member of Rothschild Mexico, led the deal team on BAT’s acquisition of Protabaco.

Cambridge educated Paiva has 20 years experience, ten of those with Rothschild and previously Lazards. He recently handled the €1.2bn acquisition by MAN of Volkswagen’s truck business in Brazil. The deal for Protabaco saw negotiations starting in January, with a team of bankers in London backing up Chile-based Paiva. He dealt directly with the family owners of the Colombian firm, which had been an acquisition target for rival Philip Morris. The negotiations were described as “smooth” and the price tag was the same as that offered by Philip Morris two years ago. That bid was blocked by competition watchdogs. Paiva’s success in sealing the deal now gives BAT a strong footprint in the Colombian market.