By BridgeNews Gallaher Group PLC, the British tobacco company, has agreed to buy Austria Tabak AG in a deal worth a total of 2.1 billion euros (US$1.8 billion), including debt, to become Western Europe's fourth-largest cigarette manufacturer. The maker of Benson & Hedges and Silk Cut will acquire a stake of 41.13% in Austria Tabak from the Austrian government for 770 million euros, or 85 euros per share. Under Austria's acquisition law, Gallaher will have to make an equivalent purchase offer to the remaining shareholders, making a total price of around 1.87 billion euros. Gallaher also will take on 264 million euros of Austria Tabak's debt. "The acquisition of Austria Tabak will represent the second transforming deal for Gallaher, after our purchase of Liggett-Ducat last year," says CEO Nigel Northridge. "It will be significantly earnings-enhancing in the first full year and will provide us with a greater presence across the whole of Europe." Gallaher will finance the deal through new debt facilities. It intends to refinance about 150 million sterling (US$212 million) through an issue of new shares. Austria Tabak is the dominant cigarette company in Austria, with a market share of around 53%. Following its acquisition in 2000 of Swedish Match, Austria Tabak is the market leader in Sweden. It also distributes tobacco products through its wholesale division and is the largest tobacco vending machine operator in Germany. The transaction is subject to approval by antitrust authorities and Gallaher's shareholders.