Japan Tobacco Inc. (“JT”) (TSE: 2914) announced today that the JT Group has entered into an agreement to acquire a 20% stake in Megapolis Distribution B.V., a holding company of CJSC TK Megapolis (“Megapolis”), its domestic Russian distribution affiliate. The agreement has been signed1 between the JT Group and Megapolis Investment B.V., which controls Megapolis. The acquisition is expected to be completed2 by December 31, 2013.
Philip Morris International Inc. (“PMI”) has simultaneously entered into a similar agreement.
Megapolis is Russia’s leading tobacco distributor, accounting for approximately 70% of the Russian cigarette distribution market. In 2012 it delivered more than 260 billion sticks of cigarettes to more than 150,000 points of sale.
This acquisition will strengthen the long term relationship between the JT Group and Megapolis. It will allow Megapolis to enhance and modernize its distribution capabilities, leading to further efficiencies and enhanced earnings.
“Megapolis has been our partner since 2007 and has contributed to JTI’s success in the important Russian market” commented Kevin Tomlinson, Regional President Commonwealth of Independent States for Japan Tobacco International (“JTI”). “This acquisition will strengthen their distribution platform allowing us to implement our growth strategy in the region more efficiently and effectively”.
As part of this agreement, the JT Group will acquire a 20% stake in Megapolis Distribution B.V. for a cash consideration of US$ 750 million, which excludes an additional component of up to US$ 100 million which is subject to Megapolis’ operational performance over the four fiscal years following the closing of this transaction. This investment will be funded by the JT Group’s existing funds and loan facilities. The acquisition is expected to have a minor effect on the Group’s consolidated performance for the fiscal year 2013.