Philip Morris, Japan Tobacco Buy Stakes in Russia’s Megapolis

Philip Morris International Inc. (PM) and Japan Tobacco Inc. (2914) will each acquire a 20 percent stake in Russia’s Megapolis Distribution BV for a combined $1.5 billion to expand in the world’s second-largest cigarette market.

Megapolis is one of Russia’s largest distributors of consumer goods, mostly delivering tobacco and beverages. The company handles 70 percent of cigarettes sold in Russia through its distribution agreements with New York-based Philip Morris, Japan Tobacco and Imperial Tobacco Group Plc, according to a statement today.

Philip Morris, the world’s biggest publicly traded tobacco company, recently forecast falling volume in Russia amid increased governmental anti-tobacco measures. That market accounted for 370 billion units in 2012, making it the largest after China. Today’s agreement would support business expansion in the nation, according to the statement.

The deal would add to Philip Morris’s earnings per share in the first quarter of 2014, according to the statement. Philip Morris and Japan Tobacco may pay an additional $100 million each depending on Megapolis’s business performance over four years, both companies said.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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