BAT will take a 51 percent stake in Uztobacco, which will be renamed Uzbat and restructured into a vertically integrated concern, responsible for everything from production to distribution.
BAT, the world's second largest cigarette maker, will renovate a cigarette plant in Tashkent and two tobacco processing plants in Samarkand and Urgut. A new cigarette factory will also be built in Samarkand.
Overall output capacity is targeted at 25 billion cigarettes a year -- exceeding the estimated demand in Uzbekistan of around 20 billion.
Well-known Western brands like Lucky Strike, Kent and Hollywood will be produced alongside brands marketed in Uzbekistan and across the Commonwealth of Independent States.
"The primary objective is the Uzbek consumer, and we will also be building up volume for export," Bruce-Miller said.
The deal marks the conclusion of talks lasting 18 months. An original memorandum of understanding was signed in October 1993 and a share purchase agreement initialled in May of this year. Some terms remain confidential, but sources close to the deal in Tashkent said a down payment of $60 million had already been made and that by the end of the five-year period BAT would have virtually outright control of Uzbat.
Equipment and machinery will be brought in from the West to upgrade existing plants and build new capacity, but BAT will follow its policy of hiring local management to run the plants.
Bruce-Miller said BAT would also assist in improving the quality of the tobacco harvest in the Central Asian republic, and also seek to export part of the crop.
BAT -- second to Philip Morris of the U.S. in the world market -- has already signed agreements worth $65 million in the Ukraine and Hungary. Two deals in Russia are at an advanced stage, with talks also going on in Moldova, Belarus, Poland, Vietnam and China.
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