Asia Times: Japan Tobacco moves to No. 3 worldwide



	March 12, 1999	atimes.com

Japan Economy

Japan Tobacco moves to No. 3 worldwide

Japan Tobacco Inc.'s purchase of the international tobaccobusiness of RJR Nabisco Holdings Corp. for $7.83 billion (940billion yen) is the biggest foreign corporate acquisition evermade by a Japanese company, JT officials said.

The price surpasses the record $6.1billion paid by Matsushita Electric Industrial Co. to buy MCA in1990, and it moves JT from its position as the world'sfourth-largest tobacco producer to the No. 3 spot.

Asahi Shimbun reported that JT apparently decided to take the step in an effort to offset the problems it has faced in its efforts to expand into thepharmaceutical, processed food and Italian restaurant markets.

The paper said the company had spent 110 billion yen recently to acquire a series offrozen food companies and various other firms, but the newoperations had not yielded returns to match the investment.

Meanwhile, Asahi said, the company's domestic tobacco business hadfailed to grow because of anti-smoking campaigns andincreased competition from foreign tobacco producers.

With the acquisition, JT is set to again focus on its maintobacco business to ensure the company remainscompetitive, Asahi reported.

''We decided to expand our scale of operations through thepurchase of Nabisco's international unit under threat of astronger oligopoly by the No.1 producer Philip Morris Co. andtwo British makers,'' JT President Masaru Mizuno said at anews conference.

JT will use about 500 billion yen in deposits and cash as wellas about 440 billion yen in loans from financial institutions tocomplete the deal.

RJR's tobacco arm, R.J. Reynolds Tobacco Co., which sellssuch famous brands as Camel, Salem and Winston, has seenits earnings deteriorate because of anti-smoking campaignsand liability suits in the United States and has been underpressure to streamline its operations.

''RJR accumulated a large debt as a result of its corporateacquisitions in the past. The timing was ripe [for JT'sacquisition] when RJR's liabilities reached settlementrecently,'' Mizuno said.

JT and RJR's international tobacco businesses willcomplement each other because JT is strong in South Korea and Taiwan, while RJR is strong in Europe and Africa. JT officials believe the company canexpand sales by selling JT products in Europe and Africawhile strengthening the sale of RJR products in Asia.

JT, formerly a nationally owned company, was privatized in1985 and listed its stocks on the stock exchanges in 1994. Ithas 100 billion yen in capital and employs 20,800 workers.

back to the top

©1999 Asia Times Online Co., Ltd.