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Imperial Tobacco to Buy Commonwealth to Enter U.S. (Update9) 

Imperial Tobacco Group Plc, the U.K. maker of Lambert & Butler, agreed to buy Commonwealth Brands for $1.9 billion to enter the U.S. discount cigarette market.

The purchase of Bowling Green, Kentucky-based Commonwealth from closely-held Houchens Industries Inc. adds five brands including USA Gold and Sonoma, Imperial Chief Executive Officer Gareth Davis said on a conference call today.

The fourth-largest U.S. cigarette maker gives Bristol, England-based Imperial 3.7 percent of the world's most profitable market. Smoking in Britain will decline this year because of a ban. Commonwealth's brands have gained a 13 percent share of the U.S. discount market since the company started selling them in 1993, and haven't lost any smoker lawsuits.

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British tobacco company expands business in U.S. market  

British company Imperial Tobacco Group PLC successfully plugged a giant gap in its global business, entering the U.S. cigarette market with its acquisition of Commonwealth Brands in a $1.9 billion (€1.4 billion) deal completed this week.

The deal allows Imperial, one of the world's biggest tobacco companies, to inherit the fourth-largest cigarette producer in the United States. Kentucky-based Commonwealth Brands, maker of discount brands USA Gold and Sonoma, has an estimated 3.7 percent of the $376 billion (€282 billion) U.S. market.

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• Imperial Tobacco completes purchase of Commonwealth 

Imperial Tobacco Group PLC has completed its $1.9 billion purchase of Commonwealth Brands of Bowling Green, Ky.

Analysts have said that Imperial's deal for Commonwealth could have implications for Reynolds American Inc. Commonwealth, best known for its USA Gold and Montclair discount brands, has gained 3.7 percent in market share in the United States in just 16 years. USA Gold is eighth in brand market share, including third among discount brands, and Montclair is 14th in brand market share.

"An immediate change is not anticipated, but Imperial has much deeper pockets and, therefore, should be more competitive" than Commonwealth, Bonnie Herzog, an analyst with Citigroup, wrote in a report.

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• New regulation could stub out Imperial Tobacco’s US hopes 

Commonwealth Brands, Imperial Tobacco’s newly acquired US tobacco business, is under threat from proposed new laws introducing tough regulatory powers over the industry.

Imperial, Britain’s second-largest cigarette company, acquired Commonwealth, the fourth-biggest player in the US, two weeks ago for $1.9 billion (£975 million).

But new Bills introduced last week in the US House and Senate, designed to give America’s Food and Drug Administration (FDA) fresh powers to regulate the tobacco business, have cast a shadow over the deal.

“It could lead to a more complex tobacco regulatory climate,” Imperial said in a statement to The Times.

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More Acquisitions in Tobacco Industry? 

The proposed $1.9 billion takeover of Commonwealth Brands by Imperial Tobacco Group PLC opens the door to more acquisitions, most likely in a year's time, according to Citigroup analysts.

"Now that Imperial has blazed a trail, you could well see more acquisitions," London-based Citigroup tobacco analyst Adam Spielman said on a conference call Tuesday.

But Spielman, as well as Citigroup's U.S. tobacco analyst, Bonnie Herzog, said the Commonwealth acquisition could delay any others for another 12 months, when more deals were expected within the next quarter. The Imperial deal complicates the acquisitions situation for any potential suitors, Spielman said.

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More Acquisitions Ina Tobacco Industry? 

The proposed $1.9 billion takeover of Commonwealth Brands by Imperial Tobacco Group PLC opens the door to more acquisitions, most likely in a year's time, according to Citigroup analysts.

"Now that Imperial has blazed a trail, you could well see more acquisitions," London-based Citigroup tobacco analyst Adam Spielman said on a conference call Tuesday.

But Spielman, as well as Citigroup's U.S. tobacco analyst, Bonnie Herzog, said the Commonwealth acquisition could delay any others for another 12 months, when more deals were expected within the next quarter. The Imperial deal complicates the acquisitions situation for any potential suitors, Spielman said.

Herzog said the deal is a validation that the litigation environment for tobacco companies has improved and a sign that other non-American manufacturers could follow Imperial into the highly profitable U.S. market.

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Imperial in £1bn swoop on discount US tobacco firm 

Imperial Tobacco surprised the market yesterday with a $1.9bn (£970m) acquisition of a US discount cigarette maker in a move that catapulted it into the No 4 position in the country.

The maker of Lambert & Butler and Richmond cigarettes announced an agreed deal to acquire Commonwealth Brands, the maker of USA Gold and Sonoma, from Houchens Industries.

Analysts said the acquisition made good financial sense, but Imperial's shares fell 3 per cent as investors noted that it makes a tie-up with a larger player far less likely.

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JORDAN: Comment: Unhealthy move? 

Imperial Tobacco shares soared to a 10 year high on hopes that chief executive Gareth Davis’s mooted last big deal might be a bid for Imperial itself.

But they fell 2.5 per cent on today’s modest $1.9 billion acquisition of US discount cigarette maker Commonwealth Brands. Investors would have liked a deal with Altadis or a move into Turkey but predators will not be attracted by higher debt and the group’s first potential exposure to US anti-tobacco litigation. . . .

America is the world’s most profitable tobacco market but this buy, Imperial’s first in the US after cigarette-paper maker Robert Burton, is not the one the market was looking for.

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• Acquisition of Commonwealth Brands 

Imperial Tobacco Group PLC today announced that it has agreed to acquire 100 per cent of CBHC Inc, which trades as Commonwealth Brands, from Houchens Industries Inc for a total cash consideration of $1.9 billion (£974 million). After taking into account the net present value of tax benefits arising as a result of the deal, the net cost of the acquisition is $1.5 billion (£769 million). In the year to 30 September 2006, Commonwealth Brands generated earnings before interest, tax, depreciation and amortisation (EBITDA) of $174 million (£89 million).

The Group anticipates that the acquisition will be completed by April 2007 and will be earnings accretive in the current financial year, before taking account of brand amortisation and deferred tax on intangibles. The Group also anticipates that the returns will exceed its weighted average cost of capital in the first full year.

Commonwealth Brands is based in Bowling Green, Kentucky and is the fourth largest cigarette manufacturer in the United States of America, with 3.7 per cent of the 376 billion US cigarette market. Commonwealth Brands employs around 720 people, including a sizeable sales force with excellent trade relationships nationwide, and has a factory which currently manufactures around 14 billion cigarettes a year but has the capacity for 30 billion cigarettes a year.

Gareth Davis, Chief Executive of Imperial Tobacco Group, said:

“This is an excellent deal for Imperial, which will create significant value for our shareholders, and is consistent with our strategy of entering the US tobacco market in a low risk manner. I am delighted that we will finally have the US as a significant part of our international footprint and believe that we will benefit considerably from having the US in our market portfolio.

“Commonwealth Brands is a terrific, young business which gives us immediate and significant access to the world’s most profitable tobacco market.

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Bowling Green cigarette maker sold 

Britain's Imperial Tobacco Group is buying Commonwealth Brands of Bowling Green, Ky., the maker of USA Gold and Sonoma discount cigarettes, from Houchens Industries for $1.9 billion.

Commonwealth Brands is the fourth-largest cigarette producer in the United States, with annual sales of 14 billion cigarettes making up an estimated 3.7 percent of the $376 billion U.S. market.

The cigarette maker's headquarters, which has about 45 employees, will remain in Bowling Green, and Imperial announced that Commonwealth's management would be kept. The company's manufacturing plant is in Reidsville, N.C.

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Like an old habit . . . 

After a decade of shying away from U.S. tobacco companies, it looks like Europe is ready to reinvest. Britain's Imperial Tobacco Group is set to buy American discount cigarette maker Commonwealth.

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Imperial Tobacco to Buy Commonwealth to Enter U.S. (Update9) 

Imperial Tobacco Group Plc, the U.K. maker of Lambert & Butler, agreed to buy Commonwealth Brands for $1.9 billion to enter the U.S. discount cigarette market.

The purchase of Bowling Green, Kentucky-based Commonwealth from closely-held Houchens Industries Inc. adds five brands including USA Gold and Sonoma, Imperial Chief Executive Officer Gareth Davis said on a conference call today.

The fourth-largest U.S. cigarette maker gives Bristol, England-based Imperial 3.7 percent of the world's most profitable market. Smoking in Britain will decline this year because of a ban. Commonwealth's brands have gained a 13 percent share of the U.S. discount market since the company started selling them in 1993, and haven't lost any smoker lawsuits.

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Imperial Tobacco in $1.9bn US deal  

Consolidation in the global tobacco industry took another step forward on Thursday with the acquisition of CBHC, the US-based owner of Commonwealth Brands, by Imperial Tobacco, the world's fourth-biggest cigarette company, for £974m ($1.9bn) cash.

Commonwealth Brands, maker of the USA Gold and Sonoma brands, is the fourth largest cigarette manufacturer in the US and is owned by Houchens Industries, the owner of supermarket, construction and insurance businesses. It makes 14bn cigarettes a year, giving it 3.7 per cent of the $376bn US market but more significantly 13.2 per cent of the discount sector. Story continues below ↓ advertisement

Gareth Davis, chief executive of Imperial, said the deal satisfied his desire to make a "low risk" entry into the US market.

"I am delighted that we will finally have the US as a significant part of our international footprint and believe that we will benefit considerably from having the US in our market portfolio," he said.

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UPDATE 3-Imperial buys 4th biggest U.S. cigarette maker 

Britain's Imperial Tobacco agreed to buy Commonwealth Brands, the fourth-biggest cigarette maker in the United States, but its shares fell on Thursday as speculation faded it might be a bid target itself.

Imperial, which makes Lambert & Butler and Richmond cigarettes in Britain, said it was buying CBHC Inc, which trades as Commonwealth Brands, from Houchens Industries Inc. for 974 million pounds ($1.9 billion) in cash.

"Through this acquisition we will gain immediate and significant access to the world's most profitable tobacco market and benefit from an enhanced operating platform," Chief Executive Gareth Davis told journalists.

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• Imperial Tobacco to Buy Commonwealth to Enter U.S. (Update8) 

Imperial Tobacco Group Plc, the U.K. maker of Lambert & Butler, agreed to buy Commonwealth Brands for $1.9 billion to enter the U.S. discount cigarette market.

The purchase of Bowling Green, Kentucky-based Commonwealth from closely-held Houchens Industries Inc. adds five brands including USA Gold and Sonoma, Imperial Chief Executive Officer Gareth Davis said on a conference call today.

The fourth-largest U.S. cigarette maker gives Bristol, England-based Imperial 3.7 percent of the world's most profitable market. Smoking in Britain will decline this year because of a ban. Commonwealth's brands have gained a 13 percent share of the U.S. discount market since the company was created in 1993, and haven't been named in any smoker lawsuits.

``Whenever you do go into this market, you are taking on legal risk,'' said Stuart Fraser, who helps manage the equivalent of about $39 billion pounds at Brewin Dolphin Securities Ltd. in London. ``It does look though that things are quieting down a lot and the political scene has stabilized.''

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