JAPAN/UK. Japan Tobacco (JT) has agreed to buy rival Gallaher Group Plc for £7.5 billion (US$14.8 billion). Gallaher shareholders will receive 1,140 pence in cash for each share.
The offer represents a premium of around +27.1% to the average closing middle market price of 897 pence per Gallaher share for the three months prior to 6 December. The latter was the day that Gallaher made an announcement after close of trading that it was in discussions regarding a potential offer.
The offer is a premium of around +16.4% on Gallaher’s closing middle market price of 979 on the same date.
Japan Tobacco is the world’s third-biggest tobacco company and the dominant house in Japan. The acquisition of Gallaher fits with Japan Tobacco’s strategy of dominating the former Soviet bloc. By acquiring Gallaher, the world’s fifth largest tobacco company, the Japanese group will control roughly 35% of that region.
JT President and CEO Hiroshi Kimura said: “JT and Gallaher complement each other perfectly. Combining our brands and expertise will create a leading global tobacco company with strong positions in both the Europe and CIS regions.”
Gallaher Chairman John Gildersleeve said: “Our successful growth strategy has enabled Gallaher to achieve a significant position in the global tobacco market. The offer from JT reflects Gallaher’s achievements and provides shareholders with the ability to realise their investment for cash at an attractive value. The importance of scale, a broad geographic coverage and a leading and diversified brand portfolio are becoming increasingly apparent.”
JT said the acquisition would fulfil a number of strategic objectives:
*strengthen JT’s position as the world’s third largest cigarette manufacturer and allow JT to become a more balanced group with a combined annual volume of 600 million sticks.
*complement JT’s international presence and combine Gallaher’s portfolio of strategically important cigarette brands – Benson & Hedges, LD, Mayfair, Memphis, Ronson, Silk Cut, Sobranie and Sovereign – with JT’s complementary flagship brands.
*provide JT with greater Virginia blend capabilities and other tobacco products, including Gallaher’s strategic brands Hamlet and Old Holborn, as well as its snus brands Gustavus, LD and Level.
*enhance profit margins through exposure to high-margin markets and economies of scale.
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Gallaher confirms approach as Japan Tobacco seeks to expand international operations – 07/12/06
