US: Japan Tobacco to buy Reynolds American brand for 5 billion dollars | Progresiv
Japan Tobacco Inc has agreed to pay 5 billion dollars for Reynolds American Inc's premium Natural American Spirit tobacco brand outside the United States - a deal that sent its shares plunging on concerns it was too expensive. 
Japan already accounts for around half of Natural American Spirit's sales outside the U.S. market and analysts were upbeat about prospects for Japan Tobacco to use its wide distribution channels to boost sales of the no-additive high quality leaf brand.
The brand, which has seen rapid growth, also counts Germany, Switzerland and Italy as key markets. But the price tag, cited at 250 times the brand's earnings before interest and tax by analysts, has raised eyebrows.
The former state monopoly, still 33.4 percent owned by the Japanese government, is no stranger to big deals and has a reputation for being able to nurture brands. It bought the non-U.S. tobacco business of RJR Nabisco Inc for around 7.8 billion dollars in 1999 and British peer Gallaher Plc for about 18.8 billion dollars in 2007.
For Reynolds American, the sale relieves it of the need to invest further to support the brand internationally, and will allow it to focus on the U.S. market as well as give it more leeway to pay down debt.
A spokesman at Japan Tobacco said the company will use cash on hand and bank loans to finance the deal, which is due to be concluded by early 2016 pending regulatory approval. (www.reuters.com)
