Japan Tobacco in advanced talks to buy Reynolds American's Sante Fe Natural Tobacco unit for $5 bn

Japan Tobacco Inc (JT) is in advanced talks to buy Reynolds American Inc's Sante Fe Natural Tobacco unit for about $5 billion, and a deal is likely to be finalised this week, the Nikkei business daily yesterday reported without citing its source.

A potential deal would be JT's largest after it acquired the UK's Gallaher in 2007 for $14.7 billion.

The deal would give JT the marketing rights for the Natural American Spirit brand sold in the US, Japan and Europe, the report said and added that Reynolds could exclude American rights for the brand from the deal.

Reynolds American, the maker of Salem, Doral and Camel, acquired privately held Santa Fe Natural Tobacco Co in 2001 for $320 million in cash.

Santa Fe Natural Tobacco manufactures and markets Natural American Spirit cigarettes and roll-your-own tobacco products. Natural American Spirit products are made with 100 per cent additive-free tobacco and include thirteen cigarette styles and four roll-your-own styles.

Tokyo-based JT is a global tobacco company with significant presence in Japan, Russia, the US, and the UK. Its popular brands include Winston, Camel, Mild Seven, Benson & Hedges, and Seven Stars. Apart from tobacco, the company is also engaged in pharmaceutical, food and beverage businesses.

JT was formed in 1985 as a government company with 100 per cent ownership. Since then, the government has sold its stake four times and privatised the company in 1994.

JT has in recent years been expanding overseas and has spent billions of dollars in acquisitions in the tobacco, food and pharmaceutical sector.

It also acquired RJR Nabisco's non-US tobacco business in 1999 for $7.8 billion.

JT, the world's third-biggest cigarette maker after British American Tobacco and Philip Morris International, aims to become the world's biggest through aggressive overseas acquisitions.