British American Tobacco (BAT) has increased its presence in Bosnia by acquiring Bulgarian cigarette maker Bulgartabac's entire range of tobacco brands in the country and its retail business operating under the brand Lafka, BAT Adria said on Wednesday.
Bulgartabac's Banja Luka-based tobacco factory, however, will remain property of the Bulgarian company, BAT Adria said in a statement sent to SeeNews.
“By taking over Bulgartabac's tobacco brands and retail operations we will further strengthen our presence on the market of the Serb Republic and the entire Bosnia and Herzegovina,” Ram Addanki, CEO of BAT Adria, is quoted saying. Addanki noted that Bosnia is an interesting market for BAT despite its very challenging business environment, which is mostly the result of high excise duties which entail illegal sales.
“In Bosnia, the black market takes up more than 30% of the total consumption of tobacco, which annually costs the country more than 200 million marka ($108.6 million/102.3 million euro),” he explained.
Earlier on Wednesday BAT said it has signed an agreement with Bulgartabac to buy its leading brands for more than 100 million euro ($106.2 million). The proposed acquisition is subject to anti-trust approvals and is expected to complete by mid-2017, BAT said in a statement.
In addition, BAT will acquire distribution and retail assets in Bulgaria and within the wider Adriatic region. The acquisition will allow BAT to increase its market share to 40% in Bulgaria, up from 12% at present.
BAT recently purchased the tobacco business of Bosnian company Fabrika Duhana Sarajevo (FDS), including its retail business and tobacco brands, from Austria's CID Adriatic Investments (CID).
CID held 78.8% stake in FDS after it bought a 39.9% stake from the government of Bosnia's Federation in September, and an additional 38.8% stake via a buyout bid in December. The funds for both transactions were provided to CID by BAT. The Serb Republic and the Federation are two autonomous entities that make up Bosnia and Herzegovina.
BAT is the second largest tobacco company in the world by global market share. Its brands are sold in more than 200 markets. It employs more than 50,000 people worldwide, BAT has market-leading positions in at least 55 markets around the world.
In Southeastern Europe (SEE), BAT operates in Albania, Bulgaria, Kosovo, Macedonia, Montenegro and Serbia.
Bulgartabac is the leading independent cigarette manufacturer in Bulgaria with a current market share of 30%.