Acquisition

British American Tobacco PLC
16 July 2003

For immediate release: 16 July 2003



                      British American Tobacco to acquire
                         Italian state tobacco company



British American Tobacco today agreed to acquire ETI - Ente Tabacchi Italiani
S.p.A., Italy's state tobacco company, for €2.32 billion (£1.6 billion).



The important acquisition will elevate British American Tobacco to the number
two position in Italy, the second largest tobacco market in the European Union.



The scale of the enlarged operations will bring significant opportunities to
compete and grow ETI's local brands and British American Tobacco's international
brands.



Martin Broughton, Chairman of British American Tobacco, said: "This
strategically important investment will transform our presence in one of
Europe's largest tobacco markets.



"The price we are paying is higher than the market has been expecting but it
reflects the detailed financial information we have received, the discussions we
have had with ETI's management and our view of the long term prospects for the
business and synergies that can be achieved. We got a good deal at a fair 
price."



He added: "ETI's management has done an excellent job in revitalising the
company.  We look forward to a long and very successful relationship with ETI's
employees, its customers, tobacco growers, other suppliers and the Italian
Government."



ETI sold more than 26 billion cigarettes in 2002 - about 26% of the market -
including well-known brands MS and Sax. It also has almost 40% of the country's
cigar sales.  The company employs more than 2,100 people and owns five cigarette
and two cigar factories.



ETI, through its subsidiary Etinera, is also responsible for the distribution of
most tobacco companies' products to Italy's 58,000 tobacconist shops.  British
American Tobacco is committed to maintaining the neutrality of Etinera from the
manufacturing and marketing business. However, its valuation of ETI does not
rely on other manufacturers continuing to use Etinera.



In the year to 30 September 2003, ETI is expected to report operating profit
(EBITDA) of €190 million on revenues of €669 million, up 31% from €145 million
in 2002. The increase reflects savings which have already been achieved through
a restructuring programme involving factory closures and redundancies, and new
cigarette prices from April 2003.  At 31 March 2003, ETI's net assets were €114
million and it had net cash of €86 million.



British American Tobacco believes there will be scope for reducing the combined
overhead base of its enlarged Italian operations and for cost savings from its
greater purchasing scale. In total, these are expected to amount to
approximately €35 million per annum achieved in full by 2007.





The privatisation agreement between ETI management and trade unions, which
prohibits further factory closures and compulsory redundancies for three years,
will be honoured.



The acquisition, which will be funded from existing company resources, is
expected to be immediately earnings enhancing, before the amortisation of
goodwill.



British American Tobacco will acquire ETI in conjunction with the FB Group,
headed by Franco Bernabe, and Axiter S.p.A., a company owned by Confcommercio,
Italy's largest trade organisation.



The company acquiring ETI is the Italian-incorporated Britannica Italiana
Tabacchi S.p.A. owned by British American Tobacco Italy Limited (98%) and
British American Tobacco International Holdings (UK) Limited (2%).  British
American Tobacco holds all the ordinary shares in both these companies.  Axiter
S.p.A. and FB Group hold non-voting shares in British American Tobacco Italy
Limited which may be acquired by British American Tobacco under put and call
options after three years.



Completion of the transaction is subject to approval by the European Commission.



Contacts



British American Tobacco Press Office           Investor Relations
David Betteridge/Ann Tradigo/Sarah Corbey       Ralph Edmondson/Rachael Cummins
[phone] (24 hours)                 [phone] or 1519



Notes to editors



•         An interview with Martin Broughton is available in video, audio and
text on www.bat.com or www.cantos.com



•         Italy is the European Union's second largest cigarette market by
volume with some 103 billion cigarettes sold in 2002.  Around 26% of adults
smoke.  A packet of 20 Sax costs €2.20, Pall Mall €2.20, MS €2.50, Lucky Strike
€3.00, Rothmans €3.30 and Dunhill €3.50.



•         The recent restructuring by ETI saw employee numbers reduced from more
than 7,000 in 2000 to approximately 2,100 and the closure of 10 factories. The
remaining five cigarette factories are in Lecce, Bologna, Rovereto, Chiaravalle
and Scafati. The cigar factories are in Lucca and Cava dei Tirreni.



•         British American Tobacco is the world's most international tobacco
group and the second largest stock market-listed tobacco group by global market
share.  It currently has 85 factories in 66 countries and in 2002 sold 777
billion cigarettes. Including associated companies, the Group employs more than
85,000 people world-wide.  Its headquarters are in London.



It has a global market share of almost 15 per cent and more than 300 brands
including international brands such as Lucky Strike, Kent, Dunhill, Pall Mall
and Rothmans.



Rome-based BAT Italia has been growing with the success of international brands
including Pall Mall, Lucky Strike and Dunhill.



•         Franco Bernabe is Chairman of consulting company FB Group. He is a
former Chief Executive of Telecom Italia and oil and gas company ENI, and is
currently a director of global logistics and mail company TNT.



•         Confcommercio is Italy's largest enterprise representative body in
Italy with 780,000 members in the trade, tourism, transportation, services and
small to medium-sized enterprises sectors.  It controls Axiter S.p.A., a
business development company which provides strategic and marketing support and
services to members.




                      This information is provided by RNS
            The company news service from the London Stock Exchange