Japan Tobacco, famous maker of LD cigarettes, is discussing the possibility to buy a subsidiary of Reynolds American called Santa Fe Natural Tobacco. The tobacco companies are found almost on the final stage of discussing the deal.
Representatives of Japan Tobacco and Reynolds American told they plan to come to an agreement this week. It is expected that the price of the deal will be nearly $5 billion which would make the JTIs aquisition largest since it purchased in 2007 the U.K.’s Gallaher for $14.7 billion.
The Santa Fe subsidiary produces Natural American Spirit cigarettes for sale on the Japanese, European and US tobacco markets. JT wants to get rights to sell this popular brand of cigarettes and expand its popularity across the globe. However, Reynolds may not include American rights in the deal.
Santa Fe Natural Tobacco.was founded in 1982 and is based New Mexico. The subsidiary brings high profits to the main company. For example, 2014 report shows an income of $337 million. Natural American Spirit is marketed as additive-free and therefore is popular among young people, especially in Japan.
It is likely that JT would make Natural American Spirit a major brand for marketing in Europe, where most popular brands are Camel and Winston.
Japan Tobacco uses aquisitions to conquier new tobacco markets. In past it bought RJR Nabisco and Gallaher which helped to strenghten company’s positions on tobacco market.