Japan Tobacco Won't Comment on Report of Tekel Offer

Source from:  By Maki Shiraki Sept. 27 (Bloomberg) 09/30/2007

Japan Tobacco Inc., the world's third-largest traded cigarette maker, declined to comment on a newspaper report it planned to bid about $1.5 billion for Turkey's Tekel. An offer is likely to be made in the next six weeks for Turkey's state-owned cigarette maker, the Times reported today, citing unidentified people close to the Tokyo-based company. Yukiko Seto, a company spokeswoman, declined to comment on the report in the London-based newspaper. Japan Tobacco, which failed in a bid to buy Tekel for $1.15 billion in 2003, is seeking to expand in the Middle East and eastern Europe as cigarette consumption falls in its home market. It completed the 7.5 billion pound ($15 billion) purchase of Gallaher Group Plc in April, to increase its share in the Russian market. Japan Tobacco has the potential to be one of the ``strongest bidders'' for Tekel given its debt levels and cash flow, Erik Bloomquist, an analyst at JPMorgan Chase & Co., wrote in a report last week. Japan Tobacco shares rose 4.5 percent to 634,000 yen at the 3 p.m. close of trading in Tokyo, the biggest gain in six weeks. The stock has increased by 39 percent in the past year. Turkey's Finance Minister Kemal Unakitan is scheduled to meet potential buyers of Tekel in London today, an official of the national asset-sales agency said this week. Japan Tobacco, Imperial Tobacco Group Plc, British American Tobacco Plc and KT&G Corp. are among companies that have expressed interest, the official, who asked to remain anonymous, said. Third Try The government, which is making its third attempt to sell Tekel, aims to sell the Istanbul-based company by the end of this year, according to Turkish media reports. Cigarette companies are consolidating around the world, enabling those that remain to charge more and offsetting higher tobacco taxes. Bristol, England-based Imperial Tobacco agreed in July to acquire Spain's Altadis SA for 12.6 billion euros ($17.8 billion). Japan Tobacco's international tobacco sales rose 25 percent to 273 billion yen ($2.36 billion) in the three months ended June 30, led by revenue from Russia, Turkey, Iran and Spain. Its revenue from Japan, which accounts for three-quarters of sales, slumped 13 percent in the period. The company, which is half owned by the Japanese government, boosted its share of the global tobacco market to 10.8 percent from 7.5 percent with the purchase of Gallaher. It trails Altria Group Inc., the parent of Philip Morris International, which has 18.2 percent, and British American Tobacco with 12.3 percent, according to Japan Tobacco figures. To contact the reporter on this story: Maki Shiraki in Tokyo mshiraki1@bloomberg.net. Enditem