Japan Tobacco agrees to takeover Gallaher for £7.5 bln

Japan Tobacco Inc. has disclosed that it has approved to buy British cigarette maker Gallaher Group plc. For 7.5 billion pounds in cash. If the deal sails through it would mark the biggest ever foreign acquisition by a Japanese company. The prospective takeover will definitely lease a new life to the Japanese company as it would help checking declining sales in Japan and strengthen its position as the third largest tobacco company behind Marlboro producer Altria Group Inc. and British American Tobacco Plc. However, the real strategy of Japan Tobacco is to strengthen its global market share with single big takeover what is widely seen as a strategy to survive. Under the arrangements of the deal Japan Tobacco has agreed to pay 11.40 pounds in cash per share for Gallaher, valuing it for 7.5 billion pounds excluding debt or 9.75 million pounds including debt. Following the news, the shares of Japan Tobacco rose by 3.1 percent showing the upbeat mood of the investors. However, this gives an ample room for speculation that a rival bid cannot be ruled out. Moreover, the offer extended by Japan tobacco to the share holders has been kept a fair price and the shareholders will, in all probability, accept the offer, in case a rival bid does not appear on the scene. In the meanwhile, Gallaher has stated that it would extend the offer of the deal to the shareholders, whereas Japan Tobacco has stated that it is aiming to complete the acquisition by the middle of 2007.