BAT, Dogan Bid in Turkish Tobacco Privatisation

Source from:  malaysia.news.yahoo.com Reuters - Tuesday, February 19 02/19/2008

Turkey received four bids for the long-delayed privatisation of cigarette firm Tekel Sigara, the government said on Monday, with British American Tobacco the only major international cigarette firm to bid. Analysts said a new smoking ban in Turkey, and Tekel's declining market share, might have dimmed interest even though Turkey is one of world's biggest cigarette markets and Tekel one of the few major tobacco assets worldwide that is up for sale. Turkish energy-to-media conglomerate Dogan Holding also bid in a consortium with Citi Venture Capital International and Turkish cigarette wholesaler Tutsab for the company, which has been valued at more than $1 billion. Private equity firm Cinven [CINV.UL] bid with a group of Turkish businessmen under the group name of Strand Investment, while unlisted Turkish builder Limak Insaat bid with PI Turkey, the Privatisation Administration said in a statement. Investors submitted offers in closed envelopes and will be asked to raise bids in an auction broadcast live on television, for which no firm date has been set yet, a PA official said. Japan Tobacco -- which offered $1.15 billion in 2003 before Ankara cancelled the tender, saying bids were unsatisfactory -- did not bid this time. Japan Tobacco is the world's third largest cigarette group after Marlboro-maker Altria and BAT. Turkey, a European Union candidate, is the eighth-biggest cigarette market in the world, with Turks smoking 115 billion cigarettes a year. But Ankara has struggled to sell the company as part of a broad IMF-backed privatisation programme: in 2004 no bids were received and Ankara has postponed the sale several times. SMOKING BAN Also weighing on expectations over the sale is a ban approved last month on smoking in public places -- a major change in a country where nearly two-thirds of men smoke. Tax on cigarettes also rose this year. "The government measures restricting smoking already had an impact on expectations of aggressive bidding," said Emre Tezmen, managing director of Tera Stockbrokers. "It wouldn't surprise me if the price doesn't come out at the high end of expectations," he said, adding the government was likely to privatise the firm "no matter what". Business daily Referans said on Monday a sale price of $1.5 to $1.8 billion was expected. Broker JP Morgan valued Tekel last year at $1.0-1.6 billion. The sale includes six factories in Istanbul, Adana, Bitlis, Malatya, Samsun-Ballica and Tokat, and Tekel's brands, which include Tekel 2000. Analysts say Tekel's Turkish cigarette market share has fallen to about 30 percent, having been overtaken by Altria's 40 percent in 2007. Its market share has fallen from around 60 percent in 2001, when Ankara first said it planned to privatise the firm. Citigroup is advising on the sale. Enditem