BAT was the biggest UK investor in Burma

BAT, the world's second-largest maker of cigarettes, agreed to offload its 60% stake in Rothmans of Pall Mall Myanmar to a Singapore-based partner in the venture.

UK Prime Minister Tony Blair criticised BAT for continuing to work with the military leadership that has ruled Burma since the 1960s after it placed opposition leader and Nobel Peace Prize winner Aung San Suu Kyi in protective custody in May.

According to the UK Government, BAT's Burma operation worked closely with the business arm of the ruling military administration.

"The sale agreement follows the exceptional formal request by the British Government in July for us to reconsider our investment,'' said Michael Prideaux, BAT's director of corporate and regulatory affairs.

"The solution is a balanced outcome to a difficult dilemma."

Making it clear

Earlier this year, Premier Oil withdrew from Burma, leaving BAT as the country's biggest British investor.

"I appreciate that this was a difficult process, but I am in no doubt that the decision was the right one,'' said Mike O'Brien, foreign office minister.

Still in Burma TotalFinaElf Suzuki Ernst & Young Deutsche Post Gary Player Design Source: Burma campaign

The sale to Distinction Investment Holdings will be finalised during the next 12 months, BAT said.

The new owner will continue to produce London and State Express Brand 555 cigarettes in Burma under licence from BAT.

The company's Burma operation employs about 500 people locally. It is not a significant part of BAT's annual revenue and the company will continue to receive money under the licensing agreement, analysts said.

Campaigners said they are optimistic that today's decision may help prompt other corporations to sever ties with Burma.

"They had to be dragged out kicking and screaming but at least they are out," said John Jackson, director of the Burma Campaign UK, a London-based pressure group.

BAT shares closed two pence lower at 710p.