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Japan Tobacco to Buy Gallaher

Japan Tobacco, the world`s third largest manufacturer of cigarettes, is purchasing the British company Gallaher for $14.7 billion. This deal will be the biggest acquisition by a Japanese company outside Japan, since NTT DoCoMo purchased a share in AT&T and Wireless Group for $9.8 billion, in 2001. Japan Tobacco, who currently own the distribution rights for cigarette brands, Winston, Camel and Salem, is trying to increase its profits by expanding outside Japan, in which the percentage of smokers is stably decreasing, as well as, expanding its operations outside the cigarette sector.

The acquisition will allow Japan Tobacco a hold in Western Europe. The company already operates in Russia, and last year made a failed attempt to purchase the Turkish government tobacco company. Japan Tobacco announced that the acquisition will create a company with an annual output of 600 billion cigarettes, and will remain the world`s third largest manufacturer of cigarettes after the American Altria Group, Inc. and British-American Tobacco PLC. Analysts expect the newly formed group to draw annual revenues of approximately $5.2 billion, and that the company will come to control the Russian market with a 35% hold, as apposed to 23% control of British-American and 27% control of Altria. Russia is the world`s second largest tobacco market.

Gallaher was founded in 1857 and employs 12 thousand employees around the world. It is the world`s fifth largest cigarette manufacturer and controls markets such as Austria, Kazakhstan, Ireland, Sweden, Russia and Great Britain. The company is under pressure from the European market due to new tax laws and increased competition from Spain and Austria, as well as, new laws banning smoking in public spaces, which have recently passed in Scotland and other places in Britain.