Smoking Together
// Japan Tobacco buys Gallaher
Board of directors of Gallaher Group, fifth world’s tobacco cigarette producer, suggested yesterday that the company’s shareholders accept the offer of Japan Tobacco (JT) to buy the company for $14.7 billion. Buying Gallaher will allow JT to move closer to the leaders of the world’s tobacco market, Philip Morris and British American Tobacco (BAT), and to become major cigarette producer in Russia.
JT (its chief brands are Mild Seven, Winston, and Camel) offered to the shareholders of Gallaher (Benson & Hedges, Sobranie, LD) to buy 100 percent of the company’s shares at the price of £11.4 per share, which is 16.4 percent of the premium to the share’s price upon end of bidding on December 6 at £9.79. That is precisely the cost of Gallaher’s shares before it was announced they had received an acquisition offer.
The board of directors of the British company were unanimously for accepting that offer. Gallaher’s shares cost £11.55 at LSE on yesterday’s morning. Over half of the shareholders, who own no less than 75 percent of the company, have to give their papers for the merger to take place. If it does not happen, Gallaher will pay a forfeit of $103 million to JT. After the offer was announced, Gallaher’s shares went up by 0.3 percent only, while JT’s – by 3.11 percent.
Both JT and Gallaher said yesterday they are not ready to disclose the details of the possible merger. However, buying Gallaher will allow JT to increase production up to 587 billion cigarettes a year, and to catch up with second largest cigarette producer in the world, -- British American Tobacco (BAT, 678 billion). The world leader is still Philip Morris (990 billion cigarettes annually). JT will become the leader of tobacco market in Russia. JT’s share in Russia’s market reached 17.8 percent over 9 months of 2006, according to Business Analitika company.
Alexander Plakhov
All the Article in Russian as of Dec. 16, 2006
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