SARAJEVO (Bosnia and Herzegovina), January 26 (SeeNews) – Austria's CID Adriatic Investments (CID) said on Thursday it has reached a framework agreement with British American Tobacco (BAT) on the sale of the tobacco business of Bosnian company Fabrika Duhana Sarajevo (FDS).
BAT will take over FDS's entire tobacco business, including its retail business and tobacco brands, CID said in a statement made available to SeeNews.
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The final legally binding agreement on the transaction will be signed in the next few days, CID said.
The transaction will be completed during the first half of 2017, after obtaining the approval of FDS's shareholders and relevant regulatory authorities.
CID owns a 78.8% stake in FDS after it bought a 39.9% stake from the government of Bosnia's Federation for 42.7 million marka ($23.3 million/21.8 million euro) in September, and an additional 38.8% stake for 41.6 million marka via a buyout bid in December.
The funds for both transactions were provided to CID by BAT.
BAT will continue to produce the FDS brands in Sarajevo, CID said.
"FDS's tradition and the strength of its brands, especially Drina, combined with our international experience and knowledge will be the foundation for a strong business," Ram Addanki, CEO of BAT Adria, is quoted in the press release as saying.
He noted that doing business in the tobacco industry in Bosnia is challenging due to a high excise tax which has given birth to a large illegal market.
More than 30% of tobacco products consumed in Bosnia are bought on the black market, which means the state budget is annually losing 210 million marka, Addanki said.
Apart from tobacco, FDS holds a 66.5% stake in local lender Vakufska banka and owns minority stakes in Privredna and BOR banka, which recently merged.
In 2015, BAT purchased tobacco company Tvornica Duhana Rovinj (TDR) in neighbouring Croatia for 505 million euro ($539.5 million).
The Federation is one of the two autonomous entities that make up Bosnia and Herzegovina. The other one is the Serb Republic.
(1 euro= 1.95583 marka)