Japan Tobacco buys Gallaher
Japan Tobacco, the world's #3 tobacco company, announced it would buy UK-based Gallagher Group for $14.7 billion dollars. Gallaher is a maker of Benson & Hedges, Silk Cut; Berkeley; Dorchester and Mayfair cigarettes, along with Hamlet cigars, Condor pipe tobacco, and Amber Leaf tobacco for hand-rolling. It is the #2 cigarette maker in the UK, after British American Tobacco. Gallaher, founded in 1857, is the #8 tobacco company in the world.
Government-owned Japan Tobacco was founded in 1949. It bought the international operations of RJ Reynolds in 1999, forming Japan Tobacco International. Its flagship cigarette brand, Mild Seven, is #1 in Japan. It sells 90 cigarette brands in over 120 different countries.
This move, the biggest Japanese overseas acquisition ever, according an article in The Independent ("Japan Tobacco buys Gallaher for £7.5bn", 12/16/06), "is expected to spark a round of consolidation in the tobacco sector."
An article in the Financial Express ("Japan Tobacco to buy Gallaher for $14.7 bn as demand slows at home ", 12/15/06) quotes one industry analyst as saying: "There is an increasing need to gain scale in global tobacco, and more specifically in Europe and Russia…We will see if others choose to become involved.''
Japan Tobacco will remain behind Altria (R.J. Reynolds) and British American Tobacco as #3. The company is the overseas distributor of US brands Camel, Winston, and Salem. It has operations in Russia.
A number of analysts see this as indicting a growing participation of Japan in the international mergers and acquisitions race. Recent deals include:
- Japanese tire company Bridgestone Corp. announced it would by US-based Bandag, a tire-recapping equipment manufacturer, for $1.05 billion
- Brokerage-firm Nomura Holdings bought online stock brokerage Instinet for $1.2 billion.
- A consortium led by Toshiba bought Westinghouse Electric Co. for $5.4 billion.
- Nippon Sheet Glass bought UK-based rival Pilkington PLC, in a $3.8 billion deal.
2:32:09 PM 
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