Reynolds American to sell Natural American Spirit brand to Japan Tobacco for $5 bn

US tobacco giant Reynolds American Inc today struck a deal to sell the international rights to its organic Natural American Spirit brand outside the US to the Japan Tobacco Group of companies (JT)  for $5 billion in cash.

The deal would be JT's largest after it acquired the UK's Gallaher in 2007 for $14.7 billion.

The transaction includes 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 US.

The deal does not include the rights to the Natural American Spirit brand name and associated trademarks in the US market, US duty-free locations, US territories or in US military outlets, all of which will be retained by Santa Fe Natural Tobacco Company - a wholly owned subsidiary of Reynolds American.

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.

Reynolds American, the maker of Salem, Doral and Camel, acquired privately held Santa Fe Natural Tobacco Co in 2001 for $320 million in cash.

Santa Fe Natural Tobacco manufactures and markets Natural American Spirit cigarettes and roll-your-own tobacco products. Natural American Spirit products are made with 100 per cent additive-free tobacco and include thirteen cigarette styles and four roll-your-own styles.

Tokyo-based JT is a global tobacco company with significant presence in Japan, Russia, the US, and the UK. Its popular brands include Winston, Camel, Mild Seven, Benson & Hedges, and Seven Stars. Apart from tobacco, the company is also engaged in pharmaceutical, food and beverage businesses.

JT was formed in 1985 as a government company with 100 per cent ownership. Since then, the government has sold its stake four times and privatised the company in 1994.

JT has in recent years been expanding overseas and has spent billions of dollars in acquisitions in the tobacco, food and pharmaceutical sector.

It also acquired RJR Nabisco's non-US tobacco business in 1999 for $7.8 billion.

JT, the world's third-biggest cigarette maker after British American Tobacco and Philip Morris International, aims to become the worlds biggest through aggressive overseas acquisitions.