Reemtsma, WWT Poznan close tobacco deals
Germany's Reemtsma has purchased a 33% stake in WWT Poznan for $130 million with an option for 32% more of the shares if the company invests $45 million in the plant over three years.
"We think we have the know-how to make WWT a better company than it was before," said Jan Wierzbicki, director of Reemtsma International Poland.
Earlier in the week, Philip Morris bought a 33% stake in the Krakow plant for $227 million and an option to purchase another 32% if it invested $145 million over three years.
Apart from the "huge" amount of work in sealing two large deals in one week, "we are satisfied, we are very glad we have closed these two deals," said Piotr Konwicki, Warsaw representative for Deutsche Morgan Grenfell, adviser on tobacco privatization.
The Poznan deal gives Reemtsma a 29% share of the Polish cigarette market.
Left to be privatized are tobacco plants in lodz, Lublin and a second plant in Radom. Konwicki expects those deals to be completed sometime this year.
Opponents of the tobacco deals and of the Privatization Ministry have criticized the onslaught of large investors. Konwicki counters that these foreign investors are already on the Polish market.
For example, British-American Tobacco Industries has produced Jan III Sobieski cigarettes for more than a year and has already garnered 5.7% of the market, and Philip Morris and the Krakow plant have had a working arrangement for more than 20 years.
"You simply cannot close your eyes and pretend something is not taking place," Konwicki said.
He said the cigarette market is highly competitive and companies require significant knowledge in managing brands, maintaining quality and controlling costs. "It just happens that foreign investors know how."
Wierzbicki, director of Reemtsma International Poland, said that to be an international company, "you have to be based in many countries."
And besides, he added, Poland is the biggest market in Central Europe and third-largest in Europe behind Germany and Italy. Industry sales exceeded zl. 3 billion ($1.23 billion) in 1994.
The structure of the Reemtsma deal with Wytwornia Wyrobow Tytoniowych SA w Poznaniu is similar to previous tobacco privatizations in terms of share distribution, reinvestment and social packages.
Of the remaining shares, 15% will be offered to employees, 15% to tobacco growers and 5% to the government.
Reemtsma plans to spend $45 million on increasing the company's share capital and building a new production facility on the outskirts or just outside the city.
The German firm agreed to keep existing employee benefits, maintain the current employment of 2,300 workers for three years and grant an immediate pay raise.
It will also buy 40% of its tobacco on the Polish market in the next five years and contribute to a special fund to improve the quality of Polish tobacco. Konwicki said this stipulation is important to local tobacco growers, because the Poznan plant currently uses "significantly less than 40%" of Polish tobacco.
Last year, the Poznan plant produced 27.6 billion units, which accounted for a 27% share of the market. Combined, the two will have a 29% share.
Last year, two Polish tobacco producers were privatized. Britain's British-American Tobacco Industries purchased a 33% stake in the Augustow plant for $88 million, and France's Seita bought a 33% share in the Radom plant for $64 million.
"We think we have the know-how to make WWT a better company than it was before," said Jan Wierzbicki, director of Reemtsma International Poland.
Earlier in the week, Philip Morris bought a 33% stake in the Krakow plant for $227 million and an option to purchase another 32% if it invested $145 million over three years.
Apart from the "huge" amount of work in sealing two large deals in one week, "we are satisfied, we are very glad we have closed these two deals," said Piotr Konwicki, Warsaw representative for Deutsche Morgan Grenfell, adviser on tobacco privatization.
The Poznan deal gives Reemtsma a 29% share of the Polish cigarette market.
Left to be privatized are tobacco plants in lodz, Lublin and a second plant in Radom. Konwicki expects those deals to be completed sometime this year.
Opponents of the tobacco deals and of the Privatization Ministry have criticized the onslaught of large investors. Konwicki counters that these foreign investors are already on the Polish market.
For example, British-American Tobacco Industries has produced Jan III Sobieski cigarettes for more than a year and has already garnered 5.7% of the market, and Philip Morris and the Krakow plant have had a working arrangement for more than 20 years.
"You simply cannot close your eyes and pretend something is not taking place," Konwicki said.
He said the cigarette market is highly competitive and companies require significant knowledge in managing brands, maintaining quality and controlling costs. "It just happens that foreign investors know how."
Wierzbicki, director of Reemtsma International Poland, said that to be an international company, "you have to be based in many countries."
And besides, he added, Poland is the biggest market in Central Europe and third-largest in Europe behind Germany and Italy. Industry sales exceeded zl. 3 billion ($1.23 billion) in 1994.
The structure of the Reemtsma deal with Wytwornia Wyrobow Tytoniowych SA w Poznaniu is similar to previous tobacco privatizations in terms of share distribution, reinvestment and social packages.
Of the remaining shares, 15% will be offered to employees, 15% to tobacco growers and 5% to the government.
Reemtsma plans to spend $45 million on increasing the company's share capital and building a new production facility on the outskirts or just outside the city.
The German firm agreed to keep existing employee benefits, maintain the current employment of 2,300 workers for three years and grant an immediate pay raise.
It will also buy 40% of its tobacco on the Polish market in the next five years and contribute to a special fund to improve the quality of Polish tobacco. Konwicki said this stipulation is important to local tobacco growers, because the Poznan plant currently uses "significantly less than 40%" of Polish tobacco.
Last year, the Poznan plant produced 27.6 billion units, which accounted for a 27% share of the market. Combined, the two will have a 29% share.
Last year, two Polish tobacco producers were privatized. Britain's British-American Tobacco Industries purchased a 33% stake in the Augustow plant for $88 million, and France's Seita bought a 33% share in the Radom plant for $64 million.
