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Imperial statement gives credence to RAI/Lorillard merger speculation

| July 11, 2014

Imperial Tobacco has confirmed that it is in discussions with Reynolds American Inc. (RAI) and Lorillard about the possible acquisition of certain brands and assets owned by RAI and Lorillard.

Imperial’s statement supports speculation that RAI is in talks over the acquisition of Lorillard because any such merger would require the divestment of brands so as to avoid anti-trust issues.

Bonnie Herzog, managing director for beverage, tobacco and convenience store research at Wells Fargo Securities, who has been commenting on a possible RAI/Lorillard deal since at least early March, said today that, based on reports by the Financial Times and Bloomberg, an announcement was expected “very soon.”

Herzog said she expected that Imperial, through its U.S. operation, Commonwealth Brands, might acquire several of the smaller, nonpriority brands in an attempt to pre-empt any potential U.S. FTC (Federal Trade Commission) anti-trust issues.

Earlier this week, further speculation had it that British American Tobacco, which already owns 42 percent of RAI, might make a bid to acquire the remaining 58 percent when, at the end of this month, a standstill agreement between BAT and RAI is due to expire.

Herzog maintained, however, that a RAI/Lorillard deal was more likely, though she added that, if a BAT/RAI merger did occur, ultimately it was likely that Lorillard would be acquired by a combined BAT/RAI.

She said yesterday that the RAI/Lorillard deal would have the “blessing” of BAT.

Meanwhile, in a statement posted on its website, Imperial said it noted the recent speculation relating to a potential transaction involving RAI and Lorillard.

“Imperial confirms it is in discussions with Reynolds and Lorillard to evaluate a possible acquisition of certain assets and brands owned by Reynolds and Lorillard,” the statement said.

“The USA remains one of the world’s largest and most profitable cigarette markets. Imperial would proceed with an acquisition only if its terms met strict transaction criteria.

“There can be no certainty as to the terms upon which any acquisition or related debt financing may be agreed or whether any transaction will take place. A further announcement will be made if and when appropriate.”

Calls for tighter anti-tobacco law in China

| July 11, 2014

Anti-tobacco activists in China have called for Beijing’s proposed smoking control legislation to be more tightly defined, according to an Ecns.cn story.

The legislation, which is currently under review, is scheduled to take effect next year.

It includes a proposal that smoking be banned in public places, but Zhang Jianshu, head of the Beijing Patriotic Health Campaign Committee, who was invited to take part in the review, said he was urging lawmakers to define in the legislation exactly what was meant by “public places.”

She said too that 15-meter smoke-free buffer zones should be established at places such as sports stadiums and railway and subway stations. While there was a growing consensus for a smoking ban in enclosed public places, the concept of buffer zones needed further promotion.

Outdoor places such as parks, which were frequented by children, should also be made smoke-free under the new law, she said.

Meanwhile, Cui Xiaobo, a professor of social medicine at Capital Medical University in Beijing, said the law ought to ban tobacco sales to minors.

Currently, a ban on sales to minors was included in the law on the protection of minors, but who was supposed to enforce that was not clearly defined, he said.

Malawi’s tobacco export earnings up

| July 11, 2014

The value of Malawi’s leaf tobacco exports during the first five months of this year, at $137.7 million, were increased by 58 percent on those of the first five months of 2013, $87 million.

The exports, which, in the case of the 2014 figures, were from the Reserve Bank of Malawi, and which, in the case of the 2013 figures, were from the Tobacco Control Commission, were reported by Ventures Africa.

Malawi was one of the world’s most tobacco-dependent economies, said Ventures Africa, something that had contributed to the country’s vulnerable economic position. Tobacco made up 53 percent of Malawi’s exports and tobacco sales generated $165 million per year for Malawi.

JT’s domestic volume down in first half

| July 11, 2014

Japan Tobacco Inc’s domestic cigarette sales volume during June, at 8.9 billion, was down by 6.5 percent on that of June 2013, 9.5 billion, according to preliminary figures issued by the company today. The June 2013 figure was down by 4.2 percent on that of June 2012.

Volume during January–June 2014, at 55.1 billion, was down by 1.8 percent on that of January–June 2013, 56.1 billion, which was down by 1.4 percent on that of January–June 2012.

JT’s market share stood at 60 percent during June, at 60.7 percent during January–June and at 60.5 percent for January–December 2013.

JT’s domestic cigarette revenue during June, at ¥50.2 billion, was down by 3.6 percent from its June 2013 revenue, ¥52.1 billion.

Revenue during January–June 2014, at ¥306.1 billion, was down by 0.7 percent on that of January–June 2013, ¥308.4 billion.

Flue-cured seed sales up in Zimbabwe

| July 11, 2014

Tobacco seed sales for Zimbabwe’s 2014–2015 flue-cured season, at 827,010 g, were up by almost 6 percent on those at the same stage of preparation for the 2013–2014 crop, 781,135 g, according to a story in The Herald quoting the Tobacco Industry and Marketing Board’s latest bulletin.

Planting of the country’s irrigated tobacco is due to start Sept. 1, while the rain-fed crop will be planted from October to early December.

PMI to host results webcast

| July 11, 2014

Philip Morris International is due to host a live audio webcast at www.pmi.com/webcasts from 9 a.m. Eastern Time on July 17 to discuss its 2014 second-quarter results, which will be issued around 7 a.m. the same day.

During the webcast, which will be in listen-only mode, CFO Jacek Olczak will discuss the company’s results and answer questions from the investment community and news media.

An archived copy of the webcast will be available until 5 p.m. Aug. 15 at www.pmi.com/webcasts.

Slides and script will be available at www.pmi.com/earnings.

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