Skip to main content

RJR to Acquire Santa Fe Tobacco

RALEIGH, N.C. -- R.J. Reynolds Tobacco Holdings Inc., the second-largest cigarette maker in the United States, is attempting to buy Santa Fe Natural Tobacco Co., the maker of American Spirit cigarettes for $320 million in cash."The agreement to purchase Santa Fe is consistent with our goal of maximizing shareholder value. This acquisition will provide near- and long-term earnings growth in areas where we have expertise and can bring value. Santa Fe is a company with a history of growth based on a strong brand with excellent equity positioning," said Andrew Schindler, chairman and CEO of Winston-Salem, N.C.-based Reynolds Tobacco. RJR wants to extend its influence in the premium tobacco market. But the acquisition may be too small to immediately rescue RJR from slumping sales, warned Martin Feldman, a Salomon Smith Barney tobacco company analyst. "Clearly this would be a small one relative to the whole of R.J. Reynolds, but it would be a good acquisition," he said. RJR announced the offer to acquire Santa Fe Natural, the maker of American Spirit cigarettes, on Thanksgiving Day. RJR is not the only tobacco giant courting the small but significant brand in the tobacco business. Two months ago, Santa Fe Natural agreed to a $275 million buyout by Rothmans Inc., Canada's second-largest cigarette manufacturer behind Imperial. Rothmans, whose brands include Benson and Hedges, has five days to respond to the RJR agreement, according to the Associated Press.In a statement, Rothmans said Santa Fe Natural would have to pay $3 million as a termination fee if the board backs RJR. Feldman said he expected Rothmans would not raise its bid and that Santa Fe Natural would accept RJR's offer. Santa Fe Natural is a private manufacturer that produces exclusive premium-priced cigarettes in all 50 states and overseas. Its additive-free American Spirit cigarettes are made with organic tobacco and marketed in packages bearing the silhouette of a pipe-smoking American Indian in a feathered headdress.
This ad will auto-close in 10 seconds