Imperial Brands PLC has announced it has agreed to the sale of its worldwide premium cigar business. The sale is being done in two distinct transactions to different investment groups. The total proceeds of the sale total €1,225 million (£1,074 million or approximately $1.3 B.).
Under what was agreed to:
- Gemstone Investment Holding Ltd will acquire Premium Cigar USA for a total consideration of €185 million (£162 million). This is the business of Tabacalera USA including the brands of Altadis USA, the Internet catalog business of JR Cigars, and Casa de Montecristo retail locations.
- Allied Cigar Corporation, S.L will acquire Premium Cigar RoW for a total consideration of €1,040 million (£912 million). This includes Imperial’s 50% stake in Habanos SA as well as the VegaFina brand, the Tabacalera de Garcia factory in the Dominican Republic and the Flor de Copan factory in Honduras.
Both transactions are subject to the fulfillment of certain conditions, including customary antitrust and other regulatory clearances. Details of who is behind the investment groups have not been disclosed. Sources to Cigar Coop indicate there could be a common group behind both holding companies, and that the transactions are being done separately to separate the U.S. business from the rest of the world (which includes Imperial’s 50% stake in Habanos SA and would present a more complicated scenario as the Cuban government must approve the transaction)
In a press release, Imperial Brands PLC Joint Interim Chief Executives Dominic Brisby and Joerg Biebernick said: “We are delighted to be able to announce the sale of Premium Cigars in the current challenging global environment. It has been a complex transaction involving joint venture partners and assets across multiple geographies and we would like to thank everyone involved for working so hard to get the deal agreed.
“This disposal reinforces our strategic ambition of becoming a leaner and more agile organisation and the proceeds will realise value for shareholders by reducing debt as part of our ongoing focus on active capital management.
“We believe we have found the right long-term owners for Premium Cigars; they are committed to investing in the business to maximise future growth opportunities and are well positioned to further develop operations internationally.”
One interesting note is that the Premium Cigar RoW transaction includes the sale of the Tabacalera de Garcia and Flor de Copan factories. Both of these factories handle a substantial amount of production for Altadis USA. The factory sales are expected to close in 2021. Of the Premium Cigar RoW transaction consideration, €88 million (£77 million) will be deferred for 12 months from close and €69 million (£61 million) will be deferred and contingent upon transfer of the Dominican Republic factory.
While Imperial is exiting the premium handmade cigar business, it is maintaining its machine-made business. About a year ago, it was announced that Imperial Brands had planned to exit the premium handmade cigar business. At that time, Imperial hoped to get £2 billion from the divestiture of the premium brands. The £1.074 billion falls well short of what Imperial hoped to gain from the sale.
**This is a developing story and is being updated throughout the day**
