Japan Tobacco to acquire UK's Gallaher for $19 billion

Mumbai: Japan Tobacco Inc, the world's third-largest cigarette maker, will acquire Britain's Gallaher Group PLC in a deal that values the maker of the Benson & Hedges and Silk Cut brands in Europe for about $19 billion (2.25 trillion yen).

Japan Tobacco makes the Mild Seven brand cigarettes and is the overseas distributor for US brands Winston, Camel and Salem. The company said it would finance the takeover with own cash and a Merrill Lynch loan.

The take-over, perhaps the largest-ever corporate acquisition by a Japanese company, tops Softbank's takeover of Vodafone Group PLC's Japanese mobile-phone operations for $15.6 billion earlier this year.

The combined entity would have annual output of 600 billion cigarettes, Japan Tobacco said in a release.

"The integration of our business operations and our portfolios will position our international tobacco business for continued growth," president and chief executive of Japan Tobacco, Hiroshi Kimura, said in a statement.

The acquisition would boost Japan Tobacco's share of the European market to 23 per cent from 10 per cent and its global market share from 3.1 per cent to 11 per cent, the company said.

Gallaher would also add to Japan Tobacco's sales in Russia as it has a strong market there.

Japan Tobacco is trying to expand outside the country and looking to diversify outside cigerattes amidst falling domestic sales and faltering earnings.

Japanese companies are increasingly taking the M&A route to grow. Earlier this year, Nippon Sheet Glass Co. bought Pilkington PLC, a British rival that was twice its size, for $3.8 billion.