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. Last Updated: 07/27/2016

Gallaher to Buy Ducat For $391M




NEW YORK -- British tobacco company Gallaher Group PLC said Thursday it had agreed to buy Russian cigarette firm Liggett-Ducat for $390.5 million cash, including $56.4 million of debt.


Liggett-Ducat is a subsidiary of Vector Group Ltd., the U.S. tobacco company run by financier Bennett LeBow.


With the acquisition of Liggett-Ducat, Gallaher, the maker of cigarette brands such as Benson & Hedges and Silk Cut in Britain, will gain a dominant position in the local market, the fourth largest in the world.


Gallaher said in a statement the acquisition would "enable the enlarged group to realize cost savings and benefit from the development of Sovereign and Sobraniye, Gallaher's existing brands in the Russian market."


Liggett-Ducat, one of the nation's leading cigarette producers since 1892, makes or has the rights to 26 different brands, including Pegas, Prima and Belomorkanal.


The transaction, which is expected to close in the third quarter, helps Gallaher achieve its goal of expanding overseas to counter the declining British duty-paid cigarette market and better compete against British rival Imperial Tobacco Group PLC.


Vector, meanwhile, will reap a rich reward for the sale of the business, getting a price that nearly matches the parent company's entire market capitalization, which was $419 million Thursday.


Liggett-Ducat manufactured and marketed 25.2 billion cigarettes in 1999, the year it moved its operations to a new tobacco manufacturing facility outside Moscow. The new factory is producing at a rate of more than 40 billion cigarettes annually.


The deal is subject to Russian anti-monopoly and environmental approvals and other customary conditions.