British American Tobacco (BAT) will pay USD 494 million for 85 per cent of Indonesia’s PT Bentoel Internasional Investama.

BAT will pay IDR 873 a share for Bentoel, which sells the Star Mild brand of kretek, or clove-flavoured cigarettes, in Indonesia, the London-based company said in a statement today.
BAT will also offer to buy the rest of the Bentoel shares it doesn’t own, and expects to complete the transaction by August, the company said. BAT acquired 56 per cent stake from the Rajawali Group and the balance from other investors.
BAT’s Indonesian unit PT BAT Indonesia, which sells conventional cigarettes, has a two per cent market share. Bentoel in 2008 sold 17.7 billion cigarettes, accounting for seven per cent of the market, BAT said in the statement. The purchase will help BAT, which sells the Lucky Strike and Benson & Hedges brands, expand in a country where there are few limits on advertising and no restrictions on sales to minors as anti-smoking rules get stricter in Europe and the US.
Indonesia, the world’s fifth-largest tobacco market by volume, is the only nation in Asia that hasn’t signed the World Health Organisation’s Framework Convention on Tobacco Control. About a third of Indonesia’s 248 million people smoke, with more than 90 per cent of Indonesian tobacco users smoking kreteks.
In 2005, Philip Morris International paid about USD 5 billion to acquire 97 per cent of PT HM Sampoerna, helping the Indonesian company become the nation’s biggest cigarette maker. (pi)