BAT in £277m swoop on Colombian rival

BRITISH American Tobacco (BAT) has bought the second-largest cigarette company in Colombia for $452 million (£277m).

The UK group, which is acquiring Productora Tabacalera de Colombia, or Protabaco, is currently the number three player in Columbia - Latin America's fourth-biggest cigarette market.

Mark Cobben, BAT's director for the Americas, said the deal would help the firm "fill a strategic gap" in the region.

Protabaco sold some 5.5 billion cigarettes in 2010, accounting for almost one third of the domestic market.

Its biggest brand, Mustang, is the country's second-best selling with a market share of around 18 per cent.

BAT itself sold 708 billion cigarettes worldwide in 2010.

Funding for the cash deal will be from the group's existing resources, BAT added.

The price-tag represents a multiple of 11.3 times Protabaco's $40m 2010 earnings before interest, tax, depreciation and amortisation (Ebitda) on revenues of $110m.

Cigarette sales have been in decline in the UK since 1974 and in the US since 1981.

Currently the EU Commission is proposing to enforce "plain" cigarette packaging, a ban on the display of any tobacco products in shops and restrictions on addictive ingredients in cigarettes.

Smoking trends and regulations in emerging markets are often five to ten years behind those in developed markets, according to a Citigroup report.