Posted by meb at January 31st, 2007

ISTANBUL - TDN with wire dispathces

British American Tobacco (BAT) is considering a bid of up to $1 billion for Tekel, Turkey’s state-owned tobacco company. Following the Turkish Competition Board’s approval of Tekel’s privatization last week, officials said that the tender could be formally announced next month, assuming it wins government approval.

In an interview with The Times, BAT CEO Paul Adams said,  “If the Turkish Government puts Tekel up for sale, we would take a look at it.”

Turkey is the world’s seventh-largest cigarette market, with about 100 billion cigarettes smoked every year.

BAT, the world’s second-largest tobacco company, already has an 8 percent share of the Turkish cigarette market.

A company spokesman also announced that BAT would be interested in buying Tekel depending on the price and the exact terms of the sale.

Other possible bidders include Imperial Tobacco, Japan Tobacco International (JTI) and Spain’s Altadis, reported The Times. Meanwhile, Philip Morris International, the owner of Marlboro, is the market leader in Turkey with a 42 percent share, meaning the company may well be excluded from bidding on competition grounds, said The Times.

The privatization of Tekel is unlikely to proceed smoothly, says the news report, reminding its readers that the Turkish government has twice tried to sell Tekel in the past. In 2003 JTI offered $1.15 billion, but the government cancelled the sale, terming the bid unsatisfactory. Then in the 2004 offer no bids were received due to the restrictions imposed on the sale.

When it was first slated for privatization in 2001, Tekel’s share of the domestic cigarette market was about 60 percent, but this has now fallen to about 40 percent. Officials fear that any further delay would devalue the company still further.

There is also the looming problem of an expected 10 percent tax increase on cigarettes, which the government wants for budgetary reasons and the European Union is seeking for the purposes of harmonization with regards to Turkey’s EU bid.

Privatization officials oppose the move and Prime Minister Recep Tayyip Erdoğan has yet to decide on the timing. The government had told the International Monetary Fund (IMF) that it intended to privatize Tekel this year.

Finance Minister Kemal Unakıtan said recently that he was determined companies such as Tekel and state-owned Halkbank would be privatized this year. He rejected claims that 2007 would be a lost year because of presidential elections in May and parliamentary polls due by November.