British American Tobacco is preparing to enter the £2bn-plus bid battle for Turkey's state-owned cigarette manufacturer.
The deal would follow last month's €2.3bn (£1.4bn) acquisition of Italy's state-owned ETI and a smaller purchase of a Serbian state business, as BAT pursues its strategy to be the global number one.
The tobacco giant was criticised by analysts over the ETI purchase for over-paying. The price came as a shock to the City, which had expected BAT to pay some €900m less. The group also bid unsuccessfully for a business being privatised by the Moroccan government.
The auction of the Turkish company, Tekel, is likely to lead to further jitters among BAT shareholders. Some analysts have suggested that investors take a wary view of the stock until the series of privatisations now underway is complete.
BAT will put in a bid next month for Tekel, a company spokesman says, in the first round of the auction of the business. Some bankers have valued Tekel as high as €3.6bn. Turkey is the seventh-biggest tobacco market in the world, by volume, and Tekel has some three-fifths of it, with brands including Samsun and Yeni Herman.
The BAT spokesman said: "We're interested [in Tekel]. We've joined the process, though we are not committed to be in the final round [of the auction]."
The UK-listed company's chief executive, Martin Broughton, has cautioned that Tekel needs large-scale restructuring, and it has not been through the kind of reform process seen at ETI before privatisation, which reduced the workforce and closed less efficient plants.
Entering the bid contest will allow BAT to view Tekel's books in detail to see whether the deal "works" for the company. The sale process, being handled by Citigroup, should be completed by the end of the year.
BAT's main rivals are likely to be America's Philip Morris and Altadis, the French-Spanish venture. Others said to be in the running include Japan Tobacco and the Korean Tobacco and Ginseng Company.
Tekel is one of the last big cigarette makers that have not been bought by a multinational group. Recent deals in the sector have been struck at much higher prices than originally expected.Reuse content