British American Tobacco is disappearing from Russia – Kommersant FM

The major cigarette manufacturer British American Tobacco will finally leave Russia. The company is also leaving the Belarusian market. She sold her assets to a consortium that heads the management of the domestic subsidiary. This follows from the official message on the company’s website. The deal is planned to be closed by the end of October; its amount is not disclosed. British American Tobacco announced its plans back in 2022. In the spring, it suspended investment in the country, but the production and sale of cigarettes continued. At the end of last year, the company was able to increase its revenue by 2%.

More details about the Russian assets of British American Tobacco can be found in the Kommersant FM information:

Most likely, there will be no problems with the assortment or prices after the departure of British American Tobacco, says Maxim Korolev, head of the Russian Tabak agency. In recent years, the company has produced most of its products in Russia, and the supply of raw materials has been smoothly adjusted over the past year and a half, notes Kommersant FM’s interlocutor:

“I don’t think there will be any problems or interruptions in production, because the same management team that has been at the helm for the last year and a half will remain. This is a kind of formal action, a formal step that they require more for internal reasons or external to Russia, but not a business necessity. Therefore, this should not affect business processes, nor the stability of product supplies or prices.

As far as I know, almost all of the company’s products are manufactured in Russia and exported to some countries, in particular, the Customs Union. Perhaps some items are still being imported, but in general all this stopped a year and a half ago, since there are many difficulties, but there is no fundamental need. All efforts were devoted to building new logistics for raw materials and materials, all this was debugged, but they had very little supply of finished products.”

Last summer, British American Tobacco estimated its losses from leaving the Russian market at $1.2 billion. Judging by the official statement of the cigarette manufacturer, the consortium of investors will not buy the asset for a conditional $1, suggests the head of the Infoline-Analytics company, Mikhail Burmistrov:

“In this case, the amount was definitely not symbolic, because when selling below a certain price, a very large contribution is paid to the federal budget. And the second point is that they clearly said that this is a consortium of investors. That is, apparently, management, but not the classic management byout deal, when managers buy out a business for future payments.

Here the deal is more balanced. The amount is definitely not 50%, relatively speaking, of the fair value, but definitely not 1 cent for which Heineken was sold. I think there is some kind of in-between story here. According to my estimates, the value of the deal should have been at least $200 million. It is clear that this is still a very large discount, but definitely not like the Heineken deal.”

One of British American Tobacco’s competitors, Philip Morris International, reported difficulties with the sale of Russian assets. They arose due to legislative restrictions – foreign players have to fulfill difficult conditions in order for the deal to be approved. The corporation estimated its assets in the country at $2.5 billion.

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Elena Ivanova