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Gareth Davis – “Commonwealth Brands is a terrific, young business which gives us immediate and significant access to the world’s most profitable tobacco market” |
UK. Imperial Tobacco Group PLC has announced it has agreed to buy CBHC Inc, which trades as Commonwealth Brands, from Houchens Industries Inc for a cash total of US$1.9 billion (£974 million).
Imperial expects the acquisition, the net cost of which was US$1.5 billion, to be completed by April 2007.
Commented Imperial Tobacco Group Chief Executive Gareth Davis: “This is an excellent deal for Imperial, which will create significant value for our shareholders, and is consistent with our strategy of entering the US tobacco market in a low risk manner. I am delighted that we will finally have the US as a significant part of our international footprint and believe that we will benefit considerably from having the US in our market portfolio.
“Commonwealth Brands is a terrific, young business which gives us immediate and significant access to the world’s most profitable tobacco market. The acquisition provides us with an enhanced operating platform from which we can rapidly launch our own high quality brands. We will also now avoid the costs associated with our original organic entry, which we estimate would have been in the region of US$20 million a year.”
Based in Kentucky, Commonwealth Brands is the fourth largest cigarette manufacturer in the US, with 3.7% of the 376 billion-stick US cigarette market. The company employs around 720 people and has a factory which currently manufactures around 14 billion cigarettes a year, but has the capacity for 30 billion cigarettes a year.
The company’s key brands are USA Gold and Sonoma. USA Gold is the eighth best-selling cigarette brand in the US and Sonoma the 14th. Its other cigarette brands are Montclair, Malibu and Riviera.
Davis added: “We will further benefit from the skilled and committed employees at Commonwealth Brands, who share our focus on sales excellence and effective cost management. I am particularly pleased that the experienced senior management team has agreed to stay on to help us drive the growth of our US business.
“As well as its vast cigarette market, the US has a growing market in other tobacco products and papers. Given the strength of our multi-product portfolio and our world leadership in fine cut tobacco and papers, we believe we are very well positioned to take advantage of the growth in these sectors.”
Houchens Industries Chairman Jimmie Gipson said: “The board has approved this transaction and is very pleased to have found a partner like Imperial that recognises the value of the people and infrastructure that has been created at Commonwealth, and has the intention of building upon that infrastructure to create additional opportunities for the management and employees.”
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