JT Group to Acquire Vector Group Ltd. for $2.4B, US Market Share Up to 8%

According to a report by BNN Bloomberg on August 21, Japan Tobacco Group (JT Group) has agreed to acquire US cigarette manufacturer Vector Group Ltd. for approximately $2.4 billion to expand its business in the US. This move comes after facing obstacles in Russia and signifies a change in strategy for the company.

According to a statement released on Wednesday (the 21st), the company plans to acquire Vector Group Ltd., headquartered in Miami, at a price of $15 per share. The acquisition price represents a 7.2% premium over Vector's closing price in New York on Tuesday (the 20th).

According to Eddy Pirard, CEO of JT International, this deal will increase Japan Tobacco's market share in the United States from 2.3% to around 8% and give it ownership of two of the top ten cigarette brands in the US. The United States is the most profitable market for tobacco companies worldwide.

Since acquiring R.J. Reynolds' non-U.S. operations in 1999, JT, owner of brands such as Mevius, has been expanding internationally. With cigarette sales declining in Japan and other developed markets, the company has been seeking growth in emerging markets while also investing in alternative products and pursuing larger-scale expansion.

Bloomberg Intelligence analyst Duncan Fox stated that

Despite the double-digit decline in cigarette sales, the company's strong pricing power will enable it to generate substantial cash flow for future investments in low-risk products in the United States.

In 2017, JTI acquired Indonesian cigarette manufacturer Karyadibya Mahardhika, and in 2018, it acquired the tobacco business of Bangladesh company Akij Group.

Russia's growth plans were disrupted by the invasion of Ukraine in 2022, forcing JTI to halt its investments in that market. The company is now expanding further into the second largest tobacco market, the United States, which will help partially fill this void.

JTI has stated that they plan to utilize the cash flow generated from the Vector deal to invest in products including heated tobacco.

JTI and Altria Group collaborated to promote their Ploom heated tobacco products in the United States. Earlier this year, they announced plans to increase spending in this category by 50% and expand into new markets.

Vector is the fourth largest tobacco company in the United States, owning Liggett brands such as Eagle20s and Liggett Select.

According to the statement, the board of directors unanimously supports the sale.

In pre-market trading on the New York market, Vector's stock price rose by 7.6% to $15.05. As of Tuesday (20th), the stock has already risen by 24% this year.