Philip Morris, Japan Tobacco take $1.5 billion stake in Russian distributor

Philip Morris, Japan Tobacco take $1.5 billion stake in Russian distributor

Two international tobacco giants are each taking a 20 percent stake in a Russian consumer goods distributor for a combined $1.5 billion, Bloomberg.com reported Wednesday.

New York-based Philip Morris and Japan Tobacco will purchase the shares in Megapolis Distribution BV to support business expansion in Russia. The move follows a recent forecast by Philip Morris that increased anti-tobacco legislation in Russia will cause a drop in volume in a market that is currently second only to China’s, according to Bloomberg.com.

Megapolis is a major distributor of tobacco and beverages in Russia, and handles 70 percent of cigarette distribution in the country through agreements with Philip Morris, Japan Tobacco and UK-based Imperial Tobacco Group Plc, Bloomberg.com reported, citing company statements.

“This investment paves the way for infrastructure expansion and improved operating efficiencies in the strategic area of distribution in Russia, and will therefore benefit our wide portfolio of leading brands,” Miroslaw Zielinski, Philip Morris’ president for Eastern Europe, the Middle East and Africa, said in a statement quoted by the Associated Press on Wednesday.

Philip Morris and Japan Tobacco may pay a further $100 million each, contingent on Megapolis’ business performance over the four years after completion of the deal, Bloomberg.com reported.

Philip Morris said Wednesday that it expected the deal to boost share earnings in the first quarter of 2014, according to Bloomberg.com.