Reynolds American Inc. announced that it is selling 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 (JT Group) in an all-cash transaction with a value of approximately $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, all of which will be retained by Santa Fe Natural Tobacco Co. Inc. Santa Fe is a wholly owned subsidiary of RAI.
The international companies being sold employ about 280 people, primarily in Europe and Japan. Those 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 it does in the U.S. market.
“Natural American Spirit has achieved excellent international growth over the past several years,” said Susan Cameron, RAI’s president and CEO. “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,” she said.
Selling the international trademark rights to a company with an established global infrastructure was more advantageous to RAI than investing in an international infrastructure capable of supporting Natural American Spirit’s growth potential, Cameron said. “We believe this sale once again demonstrates our commitment to creating value for our shareholders, and we believe the addition of Natural American Spirit to the JT Group’s brand portfolio will benefit their investors as well,” she said.
Cameron noted that once the transaction is complete, the international rights to all of RAI’s operating companies’ cigarette trademarks will be owned by international tobacco companies, allowing the RAI companies to focus on brand growth in the U.S. market.
The transactions must be approved by regulatory authorities in a number of countries. The companies are working to attain regulatory approvals by early 2016, and the transaction will close thereafter.
All current international employees will become employees of the JT Group of companies following 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 transaction.