Tokyo (dpa) - Japan Tobacco, the maker of Mild Seven, confirmed Friday it has offered to buy British rival Gallaher Group Plc in a 2.25 trillion yen (19.08 billion US dollar) deal.

"We have presented a buyout proposal to Gallaher and we are in negotiations," state-controlled Japan Tobacco said in a statement to the Tokyo Stock Exchange.

It would be the biggest overseas takeover by a Japanese company and the biggest acquisition by Japan Tobacco. The takeover is estimated to be completed by the first half of 2007.

Japan Tobacco, also the owner of the Camel, Winston and Salem brands outside the US, is the world's third-largest tobacco company, behind Altria Group Inc., maker of Marlboro, and British American Tobacco Plc.

Acquiring Gallaher, the maker of Benson & Hedges and Silk Cut, would give Japan Tobacco access to the emerging markets of Russia and Kazakhstan, where cigarette consumption is growing as bans and health warnings curb smoking in western Europe, reported Bloomberg.

According to industry experts, the former government monopoly needs to grow overseas as demand slows in Japan due to higher cigarette taxes and prices and the declining number of smokers.

Japan Tobacco's current market share is 7.8 per cent after the United States' Philip Morris with 17.9 per cent and Britain's British American Tobacco Plc at 12.2 per cent, according to Kyodo.

Japan's Finance Minister Koji Omi welcomed the deal, "It's essential that we prepare for the company to become a global player."

The government currently owns 50 per cent of Japan Tobacco's stock, but the company will eventually be privatized, said Omi.

Japan Tobacco, which markets cigarettes in more than 120 countries, sold 410 billion cigarettes in the fiscal year ending in March and reported group sales, including those from its beverage, food and pharmaceutical businesses, of 4.64 trillion yen.

Gallaher sold 170 billion cigarettes in 2005 and reported sales of 1.9 trillion yen. The world's fifth largest tobacco company has its main markets in Britain, Ireland, Sweden and Austria and is looking to expand into Eastern Europe. // © 2006 DPA


Publication date: 15 December 2006   

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