OREANDA-NEWS. June 16, 2015. Imperial Tobacco Group PLC (the “Company”) announced that a subsidiary of the Company (“ITG Brands”) had entered into a purchase agreement with Reynolds American Inc. (“Reynolds”) for the acquisition of certain US cigarette and e-cigarette brands and assets currently owned by Reynolds and Lorillard, Inc. (“Lorillard”) (the “Transaction”), following the proposed acquisition of Lorillard by Reynolds (the “Acquisition”).

On 28 January 2015, at a General Meeting of the Company, the ordinary resolution to approve the Transaction was passed by shareholders. The US Federal Trade Commission (“FTC”) subsequently gave its approval for the Acquisition on 27 May 2015, subject to a consent order requiring the Transaction to be completed, and on 8 June the United States District Court for the District of Columbia approved the sale of the acquired US cigarette brands to ITG Brands in accordance with the Department of Justice case involving those brands.

The Company is pleased to announce today that the Transaction is now complete following fulfilment (or, where applicable, waiver) of the other conditions set out in the Asset Purchase Agreement, as described in the circular to shareholders dated 15 December 2014.

The assets have been acquired for a consideration of \\$7.1bn (?4.6bn) or \\$5.6bn (?3.6bn) after adjusting for the present value of expected tax benefits of c\\$1.5bn.

Acquisition rationale

  • Builds on Imperial’s strategy of investing in Growth Brands and Growth Markets
  • Increases diversity and sustainability of Group cash flow and returns
  • Returns expected to be over 10%, well in excess of weighted average cost of capital in first full financial year 
  • Transforms Imperial into a major US competitor with c10% cigarette market share and national distribution
  • Strengthens brand portfolio, sales capability and infrastructure, enhancing retail relevance
  • Opportunity for enhanced opportunities in e-cigarettes through blu

ITG Brands

  • Enlarged US business will be known as ITG Brands and will be headquartered in Greensboro, North Carolina
  • Experienced management team appointed, led by CEO David Taylor, former CFO of Lorillard
  • Commercial and operational strategies fully defined; plans for portfolio investment, route to market and infrastructure in place and integration plans now being executed
  • Given the increased scale and prominence of the ITG Brands business we will, from our 2015 full year results, disclose the US as a separate reportable segment (US is currently within Growth Markets)

Management Changes

The following appointments have been made to ensure the right management structure is in place to lead the enlarged Group:

Matthew Phillips, previously Corporate Affairs Director and a member of the Imperial Tobacco Board for the past three years, has been appointed Chief Development Officer. In this new role, Matthew will be responsible for corporate development and Fontem Ventures, including blu. He will also retain his corporate and legal affairs responsibilities and will continue to report to Alison Cooper, Chief Executive.

Arthur van Benthem, previously Group Sales Director, is appointed CEO of Fontem Ventures. Responsibility for our global tobacco sales activities will be split across three division leaders reporting to Alison Cooper, with Amal Pramanik continuing to lead the Growth Division, Dominic Brisby continuing to lead the Returns Division and David Taylor leading the US business, ITG Brands.

Alison Cooper, Chief Executive of Imperial Tobacco, said:
“I’m delighted to announce the completion of this deal, which will transform our position in the US and generate significant returns for our shareholders. We will focus on leveraging our enhanced scale and capabilities to maximise growth opportunities for our portfolio and establish ITG Brands as a major competitive player in the US tobacco market. I’m also pleased to announce senior appointments that will strengthen our management structure and ensure that it is aligned with the Group’s on-going international development."