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International tobacco manufacturer, Japan Tobacco Group, is going to acquire the tobacco business of Akij Group, the second largest tobacco company in Bangladesh.
The two entities signed an agreement in this regard in Dhaka on Monday. The total worth of the deal is around US$ 1,476 million (Tk 124.8 billion), the biggest-ever involving a Bangladeshi company, according to the Thomson Reuters data.
This transaction will add around 17 billion units to the JT Group's overall volume and will be part of the company's continuous drive to expand in the emerging markets, the Japanese tobacco giant said in a statement.
"Akij's substantial market share places us straight at the number two position in Bangladesh, which will expand our quality top-line growth," said Mutsuo Iwai, Executive Vice President and President of JT's Tobacco Business.
"This transaction will also support our sustainable profit growth objectives in the mid- to long-term," he added.
Akij holds about a 20 per cent share of the cigarette market in Bangladesh, the eighth largest cigarette market in the world, with volumes exceeding 86 billion units and growing by about 2.0 per cent year-on-year, according to the figures coming from JT.
Akij currently occupies the number two position in both the value and base segments, together covering up to 90 per cent of Bangladesh's cigarette market, with brands such as Navy and Sheikh respectively.
"Bangladesh is one of the fastest growing economies in the world with a pro-business mindset, which is why we are keen to expand our presence in the country," said Eddy Pirard, JTI's President and Chief Executive Officer.
"The tobacco business of Akij is profitable, has state-of-the-art manufacturing facilities and a strong distribution network and workforce," he said.
"With our strong track record of integration, we can accelerate operational efficiencies and introduce some of our Global Flagship Brands alongside Akij's well-established portfolio," he added.
When contacted, Managing Director of Akij Group Sk. Bashir Uddin said, "This is a decision which has come from the shareholders. Shareholders together have decided to wind up our tobacco business."
Akij stated its journey back in 1940s and currently, the local conglomerate has diverse presence in areas like textile, food, beverage, cement, ceramics and plastics.
Japan Tobacco on the other hand was formed when JT Group acquired the non-US operations of RJ Reynolds. In 2007, it acquired UK-based Gallaher.
Currently, it has presence in 130 countries dealing with nine flagship brands and employing 40,000 people across the globe.
JT entered the Bangladesh market back in 2016 and until now, it has only tobacco brand in Bangladesh market named Winston.
The transaction is expected to be completed in the third quarter of the fiscal year 2018 following regulatory clearance, the JT statement said.
With this acquisition, JT is expected to become a major rival in the local market for other international tobacco manufacturers like British American Tobacco.
Insiders also informed that any lay-off resulting from this acquisition is unlikely.