During the 3-year analysis period, six companies closed 11 deals related to high-risk products, with transactions ranging in size from USD27 million to nearly USD50 billion. While British American Tobacco Plc (BAT) is responsible for the highest value deal, Japan Tobacco Inc (JTI) was the most active company, having made five purchases in various parts of the world.
In 2017, JTI made several substantial acquisitions, including PT Karyadibya Mahardhika and PT Surya Mustika Nusantara in Indonesia, Mighty Corporation in the Philippines, and purchasing an additional 30% share in National Tobacco Enterprise Share Company in Ethiopia. In 2018, JTI acquired Donskoy Tabak DT in Russia as well as Akij Group in Bangladesh. These activities were part of the company’s efforts to accelerate its high- risk product expansion in low-middle income countries.
The index encourages companies to stop spending funds on high-risk motivated M&As and shift their resources toward reduced-risk alternatives.
BAT’s takeover of Reynolds American Inc (Reynolds) in the US is by far the biggest deal in the review period. In 2016, Reynolds’s cigarettes volume sales accounted for a third of the US market or 79 billion sticks. In addition, the company’s high-risk product offer included moist snuff, where it also held around a third of the US market.
The remaining high-risk purchases were all undertaken by companies that are also active in reduced-risk products – Altria Group Inc (Altria), KT&G Corp (KT&G), Philip Morris International Inc (PMI), and Swedish Match AB (Swedish Match). For example, Altria took over Sherman Group Holding LLC to strengthen its position in cigars even though the company announced plans to sell the business in 2020. Swedish Match expanded its capabilities in chewing tobacco by taking over House of Oliver Twist A/S in Scandinavia.
As industry players continue to acquire high-risk businesses to strengthen their position in the total tobacco industry, this will undermine any harm reduction objectives. The index encourages companies to stop spending funds on high-risk motivated M&As and shift their resources toward reduced-risk alternatives.
2017-2019 Mergers and Acquisitions in High-Risk Products
Source: Tobacco Transformation Index estimates derived from publicly available resources (including company financial and sustainability reports, quarterly and half-year updates, press releases, investor briefings, and company presentations); industry and financial databases (Euromonitor International’s Passport databases, Orbis, and Capital IQ).
Note: Please note that data refer only to the 15 companies in the index scope.
Note: M&A includes total value of deals closed in the acquisitions of manufacturing companies only (acquisitions of distributors or retailers are excluded).
*BAT acquired the remaining 57.8% of Reynolds American Inc the company did not owned.