RAI To Sell Natural American Spirit Intl. Businesses To Japan Tobacco For $5 Bln

(RTTNews) - Tobacco maker Reynolds American Inc. (RAI) Tuesday announced the sale of the international rights to the Natural American Spirit brand name and associated trademarks, along with the international companies that distribute and market the brand outside the U.S., to the Japan Tobacco Group of companies or JT Group in an all-cash transaction valued at about $5 billion.

The purchase does not include the rights to the Natural American Spirit brand name and associated trademarks in the U.S. market, U.S. duty-free locations, U.S. territories or in U.S. military outlets, which will be retained by Santa Fe Natural Tobacco Company, Inc., a wholly owned subsidiary of RAI.

The international companies being sold employ about 280 people, primarily in Europe and Japan. These companies distribute and market Natural American Spirit additive-free and organic styles of cigarettes and roll-your-own tobacco primarily in European and Asian markets.

The brand's largest markets are Japan, Germany and Switzerland. Natural American Spirit sells at a premium price in each of the markets in which it competes, just as in the U.S. market.

Susan Cameron, RAI's president and CEO, said, "Natural American Spirit has achieved excellent international growth over the past several years. When backed by the strength of the JT Group's international distribution, sales force and manufacturing capabilities, we believe that growth trajectory will not only continue, but accelerate."

Once the transaction is complete, the international rights to all of RAI's operating companies' cigarette trademarks will be owned by international tobacco companies. This will allow the company to focus on brand growth in the U.S. market.

The transaction needs regulatory approval in several countries. The companies are working to win regulatory approvals by early 2016, and the transaction will close thereafter.

RAI said all its current international employees will become employees of the JT Group of companies after the closing of the transaction.

J.P. Morgan Securities LLC and Lazard acted as financial advisors, and Jones Day acted as legal advisor to RAI on this deal.

Separately, JT Group said that Natural American Spirit, which has a strong and international presence in a premium priced category, would allow it to further extend its brand portfolio. In Japan, which now accounts for the majority of the sales volume worldwide excluding the U.S., the brand has experienced significant growth, the company added.

RAI closed up 1 percent on Monday at $43.42. JT fell 4 percent in Tokyo to settle Tuesday's session at 3,961.00 yen.