Japan Tobacco to buy Belgium's Gryson

On Thursday, Japan Tobacco Inc. announced about the agreement to buy Gryson NV, a Belgian tobacco company, for $595 million (475 million euros). The purchase was carried out in order to extend the tobacco company’s presence in Europe because of a declining market at Japan.

JTI Gryson Logos

Logos of Japan Tobacco International and Gryson tobacco company

Being the world’s third-largest tobacco company by sales after Philip Morris International Inc. (PM) and British American Tobacco plc (BTI), Japan Tobacco increased 3.4 percent to 440,000 yen as of 9:27 a.m. in Tokyo, making for the biggest progression since March 27.

The maker of Camel and Winston cigarettes said in a statement yesterday that it will give 12.3 times expected 2012 earnings for all shares in circulation of Gryson.

In accordance with the statement, after the purchasing, the Tokyo-based company JTI will rule France’s best selling roll-your-own cigarettes, Fleur du Pays. Fleur du Pays, a succession French brand, heads the RYO/MYO market in France with an 11 percent share on sales of about 900 tons in 2011.

The president of Japan Tobacco, Hiroshi Kimura, has assented to buy rival companies in the U.K., South Sudan and Belgium since 2006 because of decreasing sales in Japan where tax boosts and aging population weaken demand.

Gryson is the also owner of Orlando and Domingo brands and operates in France, Belgium, Luxembourg, Spain and Portugal.

In concordance with the statement, the purchase of Gryson will be funded from cash and borrowing from banks and will have an insignificant influence on earnings this fiscal year. As well, the transaction is established for fulfilment this year.

Yesterday in a phone interview Erik Bloomquist, an analyst in London at Berenberg Bank, stated that the tobacco company paid a little bit towards the top end and that it is reasonable because the Gryson is increasing volumes by approximately 4 percent. The Gryson’s brands are ones that will bring significant sales growth to Japan Tobacco International.

Satsuki Kawasaki, an analyst at Credit Suisse Group AG in Tokyo, said that the cigarette maker is obtaining growth at a fair price.

Japan Tobacco’s market value has increased 22 percent this year in comparison with a 0.6 percent decrease for the broader Topix index.

Japan Tobacco spokeswoman Mahoko Tsuchiya said yesterday that the world roll-your-own and make-your-own market increased 3.9 percent at the mean between 2000 and 2011. Western Europe has responsibility for approximately 75 percent of global demand for the cigarettes, which smokers make from paper and opened tobacco, she said.

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