Altadis Closes Balkan Star Deal; Pays Euro 147 Million for 80.75% of the Company

Business Wire, Nov 4, 2004

PARIS -- On November 4th, Altadis has closed the acquisition of Balkan Star. All required authorisations having been granted, the Group acquired 80.75% of Balkan Star for a consideration of Euro 147 million on a cash free, debt free basis.

The transaction is funded from existing Altadis credit facilities.

Altadis has extended the offer to the minority shareholders holding the remaining 19.25% of the share capital of Balkan Star on the same terms and at the same price per share that is paid to the controlling shareholders. That offer will be closed in December and is expected to bring Altadis shareholding very close to 100%.

Also, the total consideration might be increased by up to Euro 20 million depending on Balkan Star's operational performance until the completion date.

With sales of over 31 billion units in 2003, Balkan Star is the largest independent tobacco company in the fourth largest tobacco market in the world. Balkanskaya Zvezda, the flagship brand of Balkan Star, is the second largest cigarette brand in Russia with 21 billion units sold. Balkan Star operates one of the largest tobacco plants in Russia, located in Yaroslavl (270 km North of Moscow), with high quality manufacturing facilities and capacity exceeding 40 billion units. The Company has a significant distribution network covering major consumption areas in Russia. It has a staff of around 1,400 employees.

For the year ended December 31, 2003, Balkan Star achieved net sales of Euro 107 million with EBITDA of Euro 18.2 million, representing a 17% margin (a). The company has net assets of ca. Euro 100 million.

(a) As per Balkan Star's consolidated financials under Russian GAAP and translated into euros with average exchange rate for 2003 of 34.7 RUR/Euro