Japan Tobacco Inc, one of the five largest tobacco companies in the world, yesterday completed its $1.47 billion acquisition of Akij Group's tobacco business, in what was the biggest ever single foreign direct investment in Bangladesh.
The announcement came more than three months after Japan Tobacco signed a deal with Akij's concern United Dhaka Tobacco for buying its shares, as part of its foray into Bangladesh's Tk 33,000 crore cigarette market.
“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,” said Japan Tobacco in a press release.
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.
In March this year, Japan Tobacco agreed to buy Russia's Donskoy Tabak for $1.56 billion. The company snapped up companies in Russia, Indonesia and the Philippines, all three amongst the top ten tobacco markets in the world.
Bangladesh is the eighth largest cigarette market, with volumes exceeding 86 billion units and growing by about 2 percent year-on-year.
Japan Tobacco said the substantial market share of Akij's tobacco business places it 'straight at the number two position in Bangladesh', which will expand the company's quality top-line growth.
Earlier, anti-tobacco campaigners criticised the deal, while industry insiders said Japan Tobacco's entry would increase competition and compliance in the market, where the British American Tobacco enjoys 60 percent share. United Dhaka Tobacco held about 20 percent share of Bangladesh's tobacco market.
“As the single largest foreign private investment in Bangladesh's history, Japan Tobacco International, a member of Japan Tobacco Group, is in it for the long-term and is committed to the country by providing international expertise and supply chain infrastructure well into the future.”
The company said Bangladesh can expect 'significant benefits' through its investment in people, trade and supply chain infrastructure.
“Japan Tobacco International has a track record of bringing world-class Japanese quality and innovation to the markets we enter through our established global brands, standards and practices,” said Maxim Lobachev, managing director of Japan Tobacco International Bangladesh.
The company said it would make future investment in the wider community through long-term and impactful corporate social responsibility partnerships with local charitable organisations, as they do in other countries.