GENEVA & WINSTON-SALEM, N.C. – While both companies said that they do not comment on rumors and speculation, sources say Japan Tobacco Inc. (JTI) is in talks to buy cigarette assets from Reynolds American Inc. (RAI) as the company seeks to expand outside of its shrinking home market, according to a report by Bloomberg News.
As reported in a 21st Century Smoke/CSP Daily News Flash, Geneva-based JTI may acquire assets worth about $5 billion, possibly including RAI’s Santa Fe Natural Tobacco Co. Inc., which makes the Natural American Spirit tobacco brands, said the people, who asked not to be identified because the information is private. While discussions are advanced, talks could still fall apart and the size of the deal and the makeup of the assets could still change, they said.
JTI president Mitsuomi Koizumi said in February that 2015 would be the company’s “year of investments,” including increased stakes in other types of tobacco products such as e-cigarettes.
The company recently entered into an agreement to acquire Logic Technology Development LLC, Pompano Beach, Fla., one of the leading U.S. electronic cigarette brands. It said it expects to complete the acquisition in the third quarter of fiscal-year 2015 following regulatory clearance.
The company has sped up acquisitions of brands and products abroad in the face of a shrinking population and a stagnating smoking rate at home, the news agency said. Japan Tobacco has said its priority is investing to boost the competitiveness of its tobacco businesses, which led to its withdrawal from drinks and vending machines.
Santa Fe could be worth as much as $7.6 billion, according to Wells Fargo Securities LLC analyst Bonnie Herzog.
“We believe this is a win-win scenario for RAI shareholders,” she wrote. “We believe if the speculation proves true, any transaction would monetize an asset that we have long believed to be underappreciated and undervalued by the market.”
Japan Tobacco Inc. is a leading international tobacco company. Its sells its products in more than 120 countries, and its brands include Winston, Camel, Mevius and LD.
Winston-Salem, N.C.-based Reynolds American Inc. is the parent company of R.J. Reynolds Tobacco Co.; Santa Fe Natural Tobacco Co. Inc.; American Snuff Co. LLC; Niconovum USA Inc.; Niconovum AB; and R.J. Reynolds Vapor Co.
R.J. Reynolds Tobacco’s brands include Newport, Camel and Pall Mall cigarettes; American Snuff’s brands include Grizzly and Kodiak smokeless tobacco products; Santa Fe Natural Tobacco manufactures and markets Natural American Spirit 100% additive-free natural tobacco products, including styles made with organic tobacco; Niconovum USA and Niconovum AB market nicotine replacement therapy products in the United States and Sweden, respectively, under the Zonnic brand name; and R.J. Reynolds Vapor manufactures and markets Vuse electronic cigarettes.