British American Tobacco (BATS.L) has acquired the second largest cigarette company in Colombia for £277.5 million (US $452 million).

The acquisition of Productora Tabacalera (Protabaco) will mean BAT is now the second largest manufacturer in the Colombian market and Latin America’s fourth largest with total industry sales of around 17 billion in 2010.

Mark Cobben, BAT’s director said the investment would strengthen and complement the company’s position in the market.

He added, ‘This will fill a strategic gap in our America’s region.’

Protabaco sold 5.5 billion cigarettes in 2010 - accounting for almost one third of the domestic market. Its biggest brand, Mustang, is the country's second best selling cigarette with a retail share around 18 per cent.

BAT said today that funding for the transaction would be from existing British American Tobacco resources.

The transaction represents a multiple of 11.3 times Protabaco's £24.5 million (US $40 million) domestic 2010 EBITDA on net domestic revenues of £67.5 million (US $110 million.)

The transaction is subject to competition authority approval and final confirmatory due diligence.