Japan Tobacco closes $1.47b acquisition of Akij venture

Japan Tobacco Inc. completed its $1.47 billion acquisition of Akij Group’s tobacco business yesterday, making it the largest single foreign direct investment in Bangladesh to date.

The announcement comes more than three months after Japan Tobacco signed a deal with Akij’s concern United Dhaka Tobacco to buy its shares, as part of its push into Bangladesh’s $33,000 crore cigarette market.

In a press release, Japan Tobacco announced that “with this investment, the company will continue to accelerate its expansion in emerging markets, a key component of the Japan Tobacco Group’s growth strategy.”

This is the second major purchase by Japan Tobacco in less than a year as it seeks new growth markets to offset shrinking sales in its traditional market, brought about by tighter smoking regulations and growing awareness of the hazards of tobacco consumption.

Japan Tobacco is looking for ways to grow its business as smoking rates decline in its home market. The company has been investing in other tobacco products, such as electronic cigarettes, and has also been expanding into new markets.

Japan Tobacco’s decision to buy Donskoy Tabak for $1.56 billion this past March has put the company in a great position amongst some of the top tobacco markets in the world. With recent acquisitions in Russia, Indonesia, and the Philippines, Japan Tobacco has set themselves up for quality top-line growth in Bangladesh – currently the eighth largest cigarette market with an estimated 86 billion units consumed annually and a 2% year-on-year growth rate.

Anti-tobacco campaigners have criticized the recent deal between British American Tobacco and Japan Tobacco, saying that it will increase competition and compliance in the market. Japan Tobacco holds about 20 percent share of Bangladesh’s tobacco market, while British American Tobacco enjoys a 60 percent share.

In a statement, Japan Tobacco said that they are committed to providing international expertise and supply chain infrastructure to Bangladesh.

Japan Tobacco International has announced that Bangladesh can expect “significant benefits” from its investment in people, trade and supply chain infrastructure.

Speaking at a press conference, Maxim Lobachev, managing director of Japan Tobacco International Bangladesh, said that the company has a track record of delivering world-class Japanese quality and innovation to the markets it enters.

“Our established global brands, standards and practices will bring benefits to Bangladesh,” he said.

The company announced that it would invest in the wider community through developing long-term partnerships with local charities, as it does with other similar organizations in other countries.