JAPAN TOBACCO, INC. Tokyo, September 29, 2015
Japan Tobacco Inc. (JT) (TSE: 2914) announced today that the JT Group has entered into an agreement with the Reynolds American Inc. group of companies ('RAI') to acquire the Natural American Spirit business outside the United States which includes the trademarks and all outstanding shares of RAI's subsidiaries outside the U.S. which sell the brand. The transaction is expected to be completed by early 2016.
Purpose for the Acquisition
Since its launch in the U.S. in 1982 by Santa Fe Natural Tobacco Company, Inc., the Natural American Spirit brand has provided a unique product offering and established a special brand positioning as the only truly global 'additive free', premium cigarette with a marketing theme that is environmentally conscious and socially progressive. The brand has enjoyed strong growth momentum in the U.S., Japan, Germany, Switzerland, Italy, Spain, the U.K. and others.
'Natural American Spirit, which has a strong and international presence in a premium priced category, will allow the JT Group to further extend its brand portfolio. This strong and unique brand equity combined with an energetic and experienced team of people will further strengthen our Group's business foundation,' said Mitsuomi Koizumi, President and Chief Executive Officer of the JT Group.
Notably in Japan, which now accounts for the majority of the sales volume worldwide excluding the U.S., the brand has experienced significant growth. This investment will underpin the Group's sustainable long-term profit growth in this highly competitive market.
The existing operations of the acquired companies will be expected to remain unchanged in order to fully benefit from their extensive knowledge and experience.
Overview of the Natural American Spirit Business outside the U.S.
(1) Business to be transferred
Spirit outside the U.S.
(2) Operating performance of the business to be transferred
Net sales: JPY 17.6 billion
Profit before income taxes: JPY 2.1 billion
(At exchange rate of 105.88, translated at YTD Average Rate. Business year ending December 2014, management basis)
(3) Amount of assets and liabilities to be transferred
Assets: JPY 14.9 billion, 2014 Debts: JPY 4.3 billion
(At exchange rate of 119.68, translated at year-end rate. Business year ending December 2014,
management basis)
(4) Acquisition price and payment
Approx. JPY 600 billion (tentative)
Payment will be made in cash.
Trademarks for Natural American Spirit outside the U.S.
RAI's nine subsidiaries selling Natural American
Overview of Reynolds American Inc.
(1) Name
REYNOLDS AMERICAN INC.
(2) Address
401 NORTH MAIN ST
WINSTON SALEM, NC 27101 USA
(3) Representative
Susan M. Cameron(CEO)
(4) Business
Reynolds American Inc. is the parent company of R.J. Reynolds Tobacco Company, Santa Fe Natural Tobacco Company, Inc. and American Snuff Company, LLC, all of which manufacture and market tobacco products. It is also the parent company of Niconovum USA, Inc. and Niconovum AB, which market nicotine replacement therapy products; and
R.J. Reynolds Vapor Company, which markets vapor
products.
(5) Paid in capital
USD 6,200 million (as of December 31, 2014)
(6) Foundation
2004
(7) Net asset
USD 4,522 million (as of December 31, 2014)
(8) Total asset
USD 15,196 million (as of December 31, 2014)
(9) Major shareholder and holding ratio
British American Tobacco plc - approximately 42% Invesco Ltd. - approximately 3.4%
The Vanguard Group, Inc. - approximately 3.4%
(as of June 30, 2015)
(10) Relationship with JT
Capital
None
Personnel
None
Business
None
Related party status
None
Schedule
(1) Agreement date | September 29, 2015 |
(2) Transfer date (planned) | Early 2016 |
5．Accounting Overview
Accounting for business combinations will be applied for this transaction in accordance with IFRS.
Impact on Financial Performance
The transaction will be funded by the Group's existing cash and loan facilities. The impact of this transaction on the Group's consolidated financial performance for the FY2015 is not expected at this moment.
(Reference) Consolidated Financial Outlook for FY2015 and Results for the FY2014
Units: Millions of Yen except where otherwise stated
Revenue
Operating
profit
Profit attributable to owners of the parent
Earnings per share
Unit: Yen
FY2015 Forecast
2,350,000
668,000
471,000
262.36
FY2014 Results
2,153,970
499,757
362,919
199.67
Overview of Natural American Spirit Business outside the U.S.
Number of Employees About 280 (sum of nine companies, Sep, 2015)
Sales Volume About 3.1 billion sticks (sum of nine companies, Dec, 2014) Sales Areas Japan, Germany, Switzerland, Italy, Spain, UK, France,
Netherlands, Belgium and others
Product The Natural American Spirit brand currently has nine cigarette varieties and three RYO varieties, all in the additive free segment
###
Japan Tobacco Inc. is a leading international tobacco company. Its products are sold in over 120 countries and its internationally recognized brands include Winston, Camel, Mevius and LD. With diversified operations, JT is also actively present in pharmaceuticals and processed foods. The company's revenue was ¥2.154 trillion (US$17,867 million(*)) in the fiscal year ended December 31, 2014(**).
*Translated at the rate of ¥120.55 per $1, as of December 31, 2014
**Due to a change in the accounting period from March 31 to December 31, the fiscal year 2014 covered nine months for Japanese domestic businesses and 12 months for the consolidated subsidiaries which operate the Group's international tobacco business. On a comparable full calendar year basis, revenue was ¥2.433 trillion (US$20,186 million(*)).
Contact: Ryohei Sugata, General Manager Media and Investor Relations Division Japan Tobacco Inc.
Tokyo: +81-3-5572-4292
mail: jt.media.relations@jt.com
Natural American Spirit in Japan
Product Lineup
ORGANIC MENTHOL
TURQUOISE GOLD MENTHOL LIGHT MENTHOL ULTRA LIGHT MENTHOL ONESPECIAL
PERIQUE RICH TASTEREGULAR
LIGHT ULTRA LIGHTROLL YOUR OWN
PREMIUM ORGANIC PERIQUE(from Santa Fe Natural Tobacco Company Japan K.K. (SFJ) website)
THIS SLIDE IS DEVELOPED TO EXPLAIN THE BUSINESS THE JT GROUP IS ACQUIRING.
IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF THE PRODUCTS OR INDUCE SMOKING 2
Product Features
Promotions
Communication to Consumers Advertisement
（from SFJ brochure)
3
THIS SLIDE IS DEVELOPED TO EXPLAIN THE BUSINESS THE JT GROUP IS ACQUIRING.
IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF THE PRODUCTS OR INDUCE SMOKING
Sales Company Profile
Company: Santa Fe Natural Tobacco Company Japan K.K. Location: Akasaka 7‐1‐1, Minato, Tokyo
Established: March, 2007 Number of Employees: approx. 150
Natural American Spirit:
was launched in the United States as 'The Original American Spirit' in 1982, by Santa Fe Natural Tobacco Company, Inc., which was established in the same year.
changed its brand name to 'Natural American Spirit' in 1993.
in Japan, was launched in 1996.
4
Sales Volume Growth
（billion sticks）
1.5
CAGR +36%
1.1
0.8
0.62011
2012
2013
2014
(Source: JT estimates)
SOM Development
NAS wins strong support from adult smokers in the 20's and 30's.
(％)
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.8
0.9
1.0
1.1
1.3
0.6
0.5
0.5
3 month SOM
FY SOM
FY13
FY14
14Q4
15Q1
15Q2
15Q3
(Jul, Aug)
(Source: JT estimates)
6. NAS Consumer Base by Age
20's
30's
40's
50's
60's or above
NAS
22%
30%
26%
14% 9%
All Brands Market Average
13%
20%
24%
19% 25%
100%
(Source: 2014data, JT estimates)
Reference: List of Product Lineup (in detail)
Cigarette Products | Price (JPY) | Sticks per pack | Tar | Nicotine |
Natural American Spirit TURQUOISE | 480 | 20 | 12mg | 1.4mg |
Natural American Spirit GOLD | 480 | 20 | 6mg | 0.7mg |
Natural American Spirit MENTHOL LIGHT | 480 | 20 | 9mg | 1.0mg |
Natural American Spirit MENTHOL ULTRA LIGHT | 480 | 20 | 5mg | 0.6mg |
Natural American Spirit MENTHOL ONE | 480 | 20 | 1mg | 0.1mg |
Natural American Spirit PERIQUE RICH TASTE | 480 | 20 | 9mg | 1.2mg |
Natural American Spirit LIGHT | 480 | 20 | 8mg | 1.0mg |
Natural American Spirit ULTRA LIGHT | 480 | 20 | 3mg | 0.4mg |
RYO Products | Price (JPY) | Grams per pack |
Natural American Spirit Premium Roll‐Your‐Own | 1,080 | 40g |
Natural American Spirit Organic Roll‐Your‐Own | 1,160 | 40g |
Natural American Spirit PERIQUE Roll‐Your‐Own | 1,080 | 40g |
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