Russia’s Donskoy Tabak Said to Work With JPMorgan to Find BuyerManuel Baigorri, Aaron Kirchfeld and Gabi Thesing
Donskoy Tabak, Russia’s largest independent tobacco company, is working with JPMorgan Chase & Co. to help it find a buyer amid a government crackdown on smoking, according to people familiar with the matter.
Privately held Donskoy Tabak may get interest from potential bidders such as Imperial Tobacco Group Plc, Europe’s second-biggest tobacco company, said the people, who asked not to be identified because the matter is private. The process may slow or even be halted due to the recent Russian conflict with Ukraine, one of the people said.
Spokespeople for Donskoy, Imperial Tobacco and JPMorgan declined to comment.
The world’s second-biggest tobacco market is consolidating after the government boosted taxes and restricted both points of sale and smoking in public places in a bid to reduce usage. The biggest tobacco wholesaler, Megapolis Distribution BV, sold a 40 percent stake in December to Philip Morris International Inc. and Japan Tobacco Inc.
Donskoy Tabak sales climbed 26 percent to 36.2 billion rubles ($1 billion) last year, helped by the tax hike, according to the company’s website. Earnings before interest, tax, depreciation and amortization were 4.6 billion rubles.
The unrest in the region has already led to two other consumer companies halting plans to sell shares in Russian businesses to the public. Metro AG last week delayed the initial public offering of its Russian Cash & Carry unit because market conditions were no longer appropriate. The ruble has dropped about 7.7 percent against the euro this year amid the worst diplomatic crisis since the Cold War.
Donskoy Tabak, owned by entrepreneur Ivan Savvidis, sells own-brand cigarettes in Russia and exports to countries including Ukraine. Savvidis’s Agrokom Group, based in the southern Russian city of Rostov, also processes meat and owns a fishery and real-estate business.