Acquisition of a 75% interest in Tobaccor SA ( "Tobaccor")
2 April, 2001Imperial Tobacco announces that it has acquired a 75% interest in Tobaccor from Bollore SA for a cash consideration of FF 1.9 billion (£179m). Bollore will retain a 25% interest in Tobaccor for a minimum of 5 years.
- Tobaccor is the second largest cigarette manufacturer and distributor in Sub-Saharan Africa. It has dominant market shares in eight countries in French-speaking West and Central Africa, and Madagascar. Tobaccor is the sole cigarette manufacturer in each of these countries, in which it also has significant distribution strength.
- Tobaccor also has a rapidly expanding business in Vietnam in partnership with Dong Nai, a local manufacturer and distributor.
- Tobaccor's headquarters are in Paris, and it has a substantial, modern tobacco processing facility in Dunkirk.
- In 2000, Tobaccor achieved sales of around 15 billion cigarettes. Over 12 billion were sold in Africa and the remainder were licensed sales of the Bastos brand in Vietnam. Turnover net of duty, in 2000 was FF 1.64 billion (£154m). On a UK GAAP basis, normalised operating profit was £33m. Minority holdings in certain subsidiary companies have a 15% interest in the operating profits.
- Tobaccor has an excellent track record. Since 1998, volumes and operating profits have grown at a CAGR of 18% and 12% respectively. The current year has started strongly.
- Africa and Asia are key target markets for Imperial. This acquisition transforms Imperial's presence in Africa and provides a springboard for growth in South East Asia. The Tobaccor acquisition brings a well invested asset base, several strong regional brands, and an experienced management team.
- Imperial expects the acquisition to enhance earnings per share, before amortisation, in 2001. A double digit return on investment is anticipated in the first full year of ownership.
"This is a unique opportunity for Imperial Tobacco to achieve a substantial and profitable presence in Africa and a platform for growth in South East Asia, regions which offer exciting growth prospects. The experience of the existing expatriate and local management, combined with Imperial Tobacco's expertise and the benefits of excellent manufacturing facilities, provide a strong foundation for growth. I am confident that the Tobaccor business and its employees will thrive within the Imperial Tobacco group, with its focus on tobacco and tobacco-related products, adding to shareholder value."
The Acquisition of Tobaccor
Imperial Tobacco announces that it has acquired a 75% interest in Tobaccor from Bollore SA for a cash consideration of FF 1.9 billion (£179m). All sterling amounts are approximate and based on an illustrative exchange rate of FF 10.62 to the £.
Information on Tobaccor
Tobaccor is headquartered in Paris and has a substantial modern tobacco processing facility in Dunkirk. Through its subsidiary, Coralma International ("Coralma"), Tobaccor has dominant market shares in each of eight cigarette markets in French-speaking West and Central Africa and Madagascar. Coralma is the sole manufacturer in these markets, in which it also has significant distribution strength, and is growing export sales to adjoining markets. In addition, it has a rapidly expanding business in Vietnam via a partnership with Dong Nai, a well established local producer and distributor.
In the year to December 2000, Tobaccor had total volume sales of around 15 billion cigarettes of which over 12 billion were sold in its African markets. The balance of sales were in Vietnam, principally licensed sales of the fast growing Bastos brand, owned by Tobaccor in Indo China. Cigarette sales comprise both local brands owned by Tobaccor and brands sold under license from other international cigarette manufacturers. Approximately 51% of current sales volume is of Tobaccor's own brands, with its primary brand in Africa, Excellence, representing some 26% of own brand sales.
The major countries in which Coralma operates are as follows:
|Region & % of 2000 Volume||Main Countries|
Burkina Faso, Senegal
Central African Republic, Chad, Congo, Gabon
In addition to the 25% minority interest in Tobaccor retained by Bollore SA, there are minority interests in certain Coralma subsidiaries which represent in total around a 15% interest in the consolidated operating profit of Tobaccor. These include a 28% minority interest in a subsidiary listed in the Ivory Coast, a 35% interest in Madagascar and a 27% interest in Burkina Faso.
In the financial year ended December, 2000, Tobaccor achieved turnover (net of duty) of FF 1.64bn (£154m) and operating profit of FF 348m (£33m), as calculated under French GAAP and as normalised under UK GAAP.
In 2000, volumes and operating profits grew by 20% and 14% respectively, continuing the consistent growth record of Tobaccor. Since 1998, volumes and operating profits have grown at a compound annual growth rate ("CAGR") of 18% and 12%, respectively. In the first 2 months of 2001 the strong growth of the group has continued, with unaudited operating profits some 15% ahead of last year.
Tobaccor's successful growth record has been achieved despite occasional political turbulence within certain of its markets. The countries in West and Central Africa in which Coralma operates are members of the Franc zone, which confers a significant degree of monetary stability on the region. The currency used in these territories is the CFA Franc, which is pegged to and freely convertible into the French franc. Tobaccor also has a strong record of converting operating profit to cash and cash has been remitted to France regularly.
As at 31 December, 2000, Tobaccor had net assets of FF 947m (£89m)of which FF 106m (£10m) relate to minorities.
Rationale for the acquisition
Since its London listing in 1996, Imperial Tobacco has delivered substantial profitable growth through the international expansion of its business, both organically and by acquisition. Through this strategy, the Group has grown profits from its international operations by 36% compound since 1996 and has increased the proportion of operating profits from international activities from 19% in 1996 to 41% in 2000.
An integral part of this strategy has been to develop significant and profitable presences in key emerging markets including Africa and Asia. These are regions in which the cigarette market continues to grow as populations increase and GDP rises. For a number of years, Imperial Tobacco has been exporting cigarettes to these regions. The acquisition of Tobaccor represents a step change in Imperial Tobacco's existing business in these markets. It is a unique opportunity to achieve a major market presence in Africa and provides a springboard for growth in South East Asia. Tobaccor delivers good regional brand equity in brands such as Excellence and Bastos and presents scope for development of Imperial Tobacco's existing portfolio of cigarette and other tobacco products. The acquisition will make Imperial Tobacco the number two player in Sub-Saharan Africa.
The acquired manufacturing facilities are well invested, producing high quality products with low conversion costs. Overall, the acquisition represents an important addition to Imperial Tobacco's sustainable non-UK profits and affords significant opportunities for profitable growth, both in existing and new markets.
Details of the Transaction
Imperial Tobacco is acquiring a 75% interest in Tobaccor on a cash and debt free basis, with Bollore SA retaining a 25% interest. This 25% holding is subject to put and call options, exercisable after a minimum of 5 years and expiring after 9 years. The option price, subject to a cap, is based on an earnings multiple similar to that of the original transaction.
Financial effects of the acquisition
Imperial Tobacco expects that the acquisition will enhance earnings per share, before amortisation, in 2001. A double digit return on investment is anticipated in the first full year of ownership. The historic EBIT multiple implicit in the transaction is 8.6 times, after allowing for all minorities. Imperial Tobacco is funding the acquisition from its existing facilities.
|Imperial Tobacco Group PLC|
|Gareth Davis, Chief Executive,||0207 404 5959|
|Robert Dyrbus, Finance Director,||0207 404 5959|
|Paul Sadler, General Manager External Affairs,||0117 963 6636|
|Tom Kyte/Stephen Breslin,||0207 404 5959|
A meeting for analysts will be held at 9:30am at the Lincoln Centre, 18 Lincolns Inn Fields, London
Disclosure regarding forward-looking statements
All statements, other than statements of historical fact, included herein, are, or may be deemed to be, forward-looking statements within the meaning of Section 21E of the Securities Exchange Act 1934, as amended,including assumptions relating to, but not limited to, the compatibility of the combined businesses, regulatory action, product pricing, investment market conditions, unaudited financial data, product development and other risks or uncertainties. These forward-looking statements represent the judgement of the relevant companies as at the date of this release and any changes in the assumptions or external factors could produce significantly different results.
For a discussion of other important factors that could cause actual results to differ materially from those discussed in such forward-looking statements please refer to Imperial Tobacco's annual report on Form 20F dated February 9, 2001 and filed with the Securities and Exchange Commission.
Nothing in this announcement should be construed as a profit forecast or be interpreted to mean that the earnings per share of Imperial Tobacco Group PLC as enlarged by the acquisition for the current year or future years will necessarily match or exceed the historical published earnings per share of Imperial Tobacco Group PLC and Tobaccor SA.
Imperial Tobacco was advised on this transaction by Schroder Salomon Smith Barney ("Schroder Salomon Smith Barney").
Salomon Brothers International Limited, trading as Schroder Salomon Smith Barney, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting for Imperial Tobacco Group PLC and no one else in connection with the transaction, and will not be responsible to anyone other than Imperial Tobacco Group PLC for providing the protections afforded to customers of Schroder Salomon Smith Barney or for providing advice to any other person in relation to the transaction.