Two of the world's largest cigarette companies, British American Tobacco (BAT) and Rothmans International, yesterday announced they will merge to create a global giant valued at more than GBP13 billion (about HK$165.28 billion).
The deal, which is estimated to generate annual cost savings of GBP250 million in three years, and one-off savings of GBP400 million, comes as the tobacco industry faces a downturn in demand, particularly in Asia.
Last month, the region's recession forced BAT (Singapore) to close down all its manufacturing activities.
The Singapore-listed unit said the operations were no longer viable and predicted a full-year loss. BAT has also closed factories in Hong Kong, Uzbekistan, Spain, Belgium and Mexico.
The merger brings together the world's second and fourth largest cigarette companies, with combined annual sales volumes of 900 billion cigarettes and a global market share of more than 16 per cent. United States giant Philip Morris, remains the largest tobacco company.
BAT chairman Martin Broughton said: 'This merger represents a major step forward in the achievement of our vision to become the world's leading international tobacco company.' BAT will issue new shares to the two companies which own Rothmans; Compagnie Financiere Richemont, the Swiss-based luxury goods group, and Rembrandt, the South African investment group. The two firms are effectively controlled by South Africa's Rupert family: Johann Rupert, chairman of Rembrandt and chief executive of Richemont said: 'The long-term interests of the Rothmans group are best served by being part of a larger tobacco business which will have enhanced market positions and greater scale of operations.' The deal is particularly aimed at boosting the presence of the two groups in mature markets, giving the enlarged group greater access to the British market through Rothmans, and a larger presence in Japan, through BAT.
Some of the world's best-known cigarettes will now be sold under one company - BAT - boasting brands such as State Express 555, Lucky Strike, Rothmans, Dunhill, Peter Stuyvesant, Kent, Benson & Hedges and Players, as well as unifying the ownership of Pall Mall, one of the fastest growing international brands in the world.