Altadis acquires majority stake in Moroccan tobacco monopoly
French-Spanish tobacco firm Altadis confirmed it has successfully acquired 80 percent of the shares in Régie des Tabacs du Maroc of Morocco (RTM) from the Moroccan government, for a total cash amount of Euro 1.292 billion ($1.52 million).
The Moroccan State undertook to keep its 20 percent stake in RTM for two years and will then have two years to possibly proceed to an IPO (initial public offering). Finally, a call and put for this 20 percent stake will be granted at the very same price for the fifth year after acquisition (in case of non-completion of the IPO).
RTM is a unique asset in the Mediterranean tobacco sector. Morocco is the fifth largest cigarette market in Africa, with consumption of 14.4 billion units in 2002. RTM controls 100 percent of distribution and produces 85 percent of Moroccan market volume.
The market will be progressively liberalized up to January 1, 2008. RTM benefits from landmark brands such as Marquise (blond tobacco), Casa Sports (plain dark) and Olympic (filter dark).
The company is highly profitable. For the year ended December 31, 2002, RTM registered an EBITDA of 94 million euro on net sales of 260 million euro, i.e. a 36 percent EBITDA margin.
Commenting on the transaction, Jean-Dominique Comolli and Pablo Isla, co-chairmen of Altadis, said “We would like to congratulate the Moroccan government for the transparency and the high quality of the privatization process. We want to stress that the acquisition of Régie des Tabacs du Maroc is a major step both for Altadis and for RTM, for the employees and shareholders.”
“Altadis built a leadership position in its three core businesses, cigarette, cigar and distribution. It will provide RTM with its experience in shifting from a monopoly state-owned entity to a privately owned company in a liberalized environment.”
“The know-how of Altadis in the modernization of local brands while shifting from dark to blond tobacco consumption and in the enhancement of distribution business will contribute to a strong value creation within RTM. These key assets will boost RTM and consolidate Altadis’ development.”
RTM’s business model is very close to the one of Altadis on its two domestic markets, France and Spain. RTM holds a dominant market position with 85 percent of the market’s volumes and 67.5 percent of value. The company operates a distribution network that covers all Morocco and delivers, not only RTM products but also all imported brands, to 23,000 licensed retailers by the mean of its 26 sales centers. RTM will keep exclusivity over wholesale tobacco distribution until January 1, 2008.
Moroccan market has an important dark cigarette segment (45 percent of total volume) and growing blond cigarette consumption. With a growing population and Gross Domestic Product (GDP), Moroccan market presents a strong growth potential in volume and in value. The three main brands of RTM, Marquise, Olympic and Casa Sports represented nearly 80 percent of the market in volume and 59 percent in value in 2002.
RTM’s products are manufactured across four production plants: Kenitra, Tétouan and Casablanca for dark cigarettes and Aïn Harrouda, a state-of-the-art factory built in 1994 for blond cigarettes. The company had a staff of 2,333 employees as of January 1, 2003.
RTM is the only importer of tobacco products in Morocco. International brands represented in 2002 15 percent of the market in volume and 32.5 percent in value. This monopoly will last until January 1, 2008.
Altadis will build on the success of RTM’s existing brands in improving their quality and enhancing marketing investments on these brands with the objective to consolidate local market shares and develop exports, according to a company press release.
Thanks to the acquisition of RTM, Altadis cigarette brands will gain access to the Moroccan market where their presence was very limited as of today. Altadis will also develop cigar offer in Morocco, the release added.
Altadis has four and a half years to secure RTM distributor position in Morocco and generate additional profit through diversification of this core business. The rationalization of the company’s manufacturing organization, as already planned by the management of RTM through the closure of Casablanca factory, will improve the company’s productivity.
The transaction will be financed through bonds issue posterior to a bridge loan. In connection with the acquisition of RTM, Altadis has requested a credit rating from leading agencies. The transaction is expected to be completed by July 2003. HSBC CCF and ATTIJARI acted as financial advisors to Altadis on this transaction. — (menareport.com)
© 2003 Mena Report (www.menareport.com)