British American Tobacco sells Russian business to management

London — British American Tobacco (BAT) said on Thursday it would sell its Russian and Belarusian businesses to a consortium led by its Russian management team, ending an 18-month process.

The maker of Camel and Lucky Strike cigarettes committed to exit Russia, the world’s fourth-largest cigarette market, in March 2022, after Moscow’s invasion of Ukraine.

Western firms have flocked to leave the nation amid sanctions imposed on Moscow, but the Kremlin has retaliated by seizing some assets.

BAT, which controlled just under 25% of the Russian tobacco market, said it had now formally agreed to sell the business in compliance with local and international laws.

“Upon completion, BAT will no longer have a presence in Russia or Belarus and will receive no financial gain from ongoing sales in these markets,” it said in a statement, adding it expects the transaction to complete within the next month.

Following the sale, the businesses will be known as ITMS Group, BAT said. The consortium will own the trademark for BAT brands, including both traditional tobacco products and alternatives such as its Vuse vapes.

BAT had been in talks with its local distributor, SNS Group of Companies, and referred to discussions with a management-distributor consortium at its full-year results in February.

However, Thursday’s release said only that the consortium was led by BAT Russia’s management team. It also did not disclose a price for the sale, or whether the terms allowed BAT to buy the business back later.

BAT said it could not provide further details.

Cigarette maker Imperial Brands sold its Russian business in 2022. BAT’s bigger rivals, Japan Tobacco and Phillip Morris International, have suspended investment and marketing or scaled down some activities, but have yet to exit.

Other recent exits include beer brewer Heineken and vehicle maker Volkswagen, while restaurant operator Amrest also sold its KFC restaurants in the country earlier this year.

Russia and Belarus accounted for about 2.7% of BAT’s revenue in the first six months of 2023, and a slightly lower proportion of its adjusted profit from operations.

The company said it remains confident of delivering its full-year guidance. It already took a £612m impairment charge related to the transfer in its 2022 financial year, and recognised an additional £17m in associated costs in the first six months of the year.

It employed about 2,500 people in Russia. BAT said the employment terms of its staff in Russia and Belarus will remain comparable for at least two years as part of the deal.

Reuters