Japan Tobacco buying Bangladesh Akij's tobacco business for $1.5 billion

FILE PHOTO: Japan Tobacco Inc (JT) headquarters building is seen in Tokyo, Japan, May 18, 2016. REUTERS/Toru Hanai/File Photo

TOKYO (Reuters) - Japan Tobacco Inc 2914.T is buying the tobacco business of Bangladesh's Akij Group for around $1.5 billion, its second major purchase in five months as the world's third-biggest cigarette maker seeks new growth markets to offset shrinking sales at home.

The 124.3 billion taka ($1.5 billion) deal, the biggest ever involving a Bangladeshi company, according to Thomson Reuters data, comes after Japan Tobacco agreed in March to buy Russia’s Donskoy Tabak for about 90 billion rubles ($1.42 billion).

“With this investment, we continue to accelerate our expansion in emerging markets that matter, a key component of Japan Tobacco Group’s growth strategy,” Japan Tobacco said in a statement on Monday.

Akij is Bangladesh’s second-biggest tobacco company and holds about 20 percent of the cigarette market in the country, which is the world’s eighth largest cigarette market, according to the statement.

It has brands such as Navy and Sheikh and its tobacco business is profitable, Japan Tobacco said. The deal would add about 17 billion units to the Japanese company’s sales volume, it added.

The acquisition of the business, United Dhaka Tobacco Co, is expected to be completed in the third quarter of this year, pending regulatory clearance, Japan Tobacco said.

Japan Tobacco and its peers - Philip Morris International PM.N, British American Tobacco BATS.L and Imperial Brands IMB.L - are grappling with slowing sales as more people give up smoking. Consolidation has been expected, especially after BAT's takeover last year of Reynolds American.

Shares in Japan Tobacco closed down 0.6 percent on Monday before the announcement.

Reporting by Chang-Ran Kim; Additional reporting by Jennifer Hughes in Hong Kong; Writing by Miyoung Kim; Editing by Chris Gallagher and Muralikumar Anantharaman