Japan Tobacco Acquires Sudan Tobacco Company for $450 Million

Japan Tobacco Inc. reached an agreement to acquire a cigarette company working in Sudan and South Sudan, which recently became an independent state after a revolt that lasted for several decades.
Haggar Cigarette & Tobacco Factory Ltd. holds 80 percent of tobacco market in Sudan and is an important player in South Sudan tobacco market, according to the Japan Tobacco press release. The acquisition rates the manufacturer of Bringi cigarette brand at 9.9 times the company’s 2010 net earnings, the company declared in a statement last week.

Japan Tobacco, the third-leading cigarette company in the world, intends to grow overseas revenues by not less than 10 percent while high taxes, smoking bans and social stigma weaken domestic cigarette market. Net revenues could increase by 11 percent to $2.1 billion in 2011 fiscal year, on growing prices in Russian and other key markets, the Japanese company which makes LD, Glamour, Camel and Winston brands admitted last week.
 “This deal is highly important because it demonstrates the company’s intention to increase its overseas presence,” confirmed Mikihiko Yamato, a Tokyo-based market expert  at Japan Invest. “JT tends to acquire business in Asian region, but it is complicated to find appropriate business in that region.”

Japan Tobacco obtained 3.7 percent in trading session in Tokyo to reach 350,000 yen, the record level since Feb. 17.

African Business

The acquisition of Haggar, which managed to sell 4.5 billion cigarettes in Sudan and South Sudan in 2010, will be financed with present funds and credits, Japan Tobacco said in a statement. No further details of the deal are available. “Africa is a very active and emerging market,” Akira Saeki, Japan Tobacco vice president, said in Tokyo last week. “Obtaining growing there is a very important step.”
Japan Tobacco’s products are available in approximately 20 African markets such as South Africa, Morocco, Algeria and Nigeria, underlined Hideyuki Yamamoto, the spokesperson for Japan Tobacco. In addition, the company holds a 97 percent share of the cigarette market in Tanzania, according to Yamamoto.

The company’s two cigarette manufacturing units are located in South Africa and Tanzania, and the group owns tobacco leaf processing plant in Malawi, added Yamamoto.
Haggar owns two cigarette plants, as written on its website. JT “will be exploring the possibilities of exporting its products from Sudan,” the company said in a statement.
Japan Tobacco is purchasing the Sudan cigarette manufacturer from its owner, Haggar Holding Company Ltd., said the company’s spokesman.
Net revenues for Japan Tobacco could reach $2.1 billion in the fiscal year ending March 31, 2011, versus $2.0 billion in the previous year, the company declared in a separate statement.
South Sudan became independent on July 9; 85 percent of adult population of South Sudan is illiterate, and more than 50 percent out of 8 million people live on not more than $1 per day.