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$1.3 Billion Deal For Imperial’s Premium Cigar Business

The transaction includes half of Cuba’s Habanos S.A., Tabacalera USA, Casa de Montecristo, JR Cigar, the world’s largest cigar factory and some of the world’s most famous cigar brands, including Cohiba and Montecristo
Apr 27, 2020 | By David Savona
$1.3 Billion Deal For Imperial’s Premium Cigar Business

British tobacco giant Imperial Brands PLC has agreed to sell its premium cigar business to an investment consortium for 1.225 billion euros ($1.3 billion), one of the biggest sales the industry has seen. The sale includes 50 percent of Cuba’s Habanos S.A., as well as the company that makes and markets a treasure trove of non-Cuban cigar brands such as Montecristo, Romeo y Julieta and H. Upmann, a pair of cigar factories, including one that’s considered the world’s largest, and JR Cigars, one of the world’s biggest cigar retail chains.

Imperial said the premium cigar business delivered £80 million ($99 million) in profits before tax in the year ended September 30, 2019.

The deal, which is taking place in two transactions, has been months in the making, and complicated by the global pandemic and the complex nature of the assets involved. It’s expected to close in the third quarter of this year.

The U.S. division is being acquired for 185 million euros ($200 million) by a company named Gemstone Investment Holding Ltd. That part of the deal includes the corporation Tabacalera USA, its assets Altadis USA, which is responsible for the distribution of premium cigars in the United States, online retailers JR Cigar, Serious Cigars and Cigars.com, plus the Casa de Montecristo retail chain.

A company named Allied Cigar Corporation S.L will acquire the remaining part of Imperial for 1.040 billion euros ($1.13 billion). That part includes half of Cuba’s Habanos S.A., the company that exports all of Cuba’s cigars.

Imperial plans on using the money raised in this sale to pay down debt.

Imperial’s premium cigar division has been run by Fernando Domínguez, premium cigar director of Imperial Brands. Domíngez has been part of the company (or its predecessors) for more than 30 years, and he will continue to run the cigar operations under the new ownership. The U.S. operations are run by Javier Estades, president and CEO of Tabacalera USA, who has been overseeing the U.S. business since 2011. Rafael Nodal, owner of the Aging Room brand of cigars, serves as head of product capability for Tabacalera USA. Management is expected to stay in place in the wake of this deal.

“Nothing changes in our operations,” Estades told Cigar Aficionado this morning. “Our business is very solid, and we are excited about this new journey with investors who are attracted about the opportunity they see in the business.”

The assets in this deal include:

  • Fifty percent ownership of Cuba’s cigar company, Habanos S.A., which is headquartered in Havana. Habanos controls the Cuban cigar industry, selling such high-profile items as Cuban Cohiba, Romeo y Julieta and Montecristo cigars, including Edición Limitadas and Regional Editions. The company also operates a vast worldwide chain of high-end cigar stores called La Casa del Habano.
  • Two handmade cigar factories, Tabacalera de Garcia and Flor de Copan. Tabacalera de Garcia, which is located in La Romana, Dominican Republic, is the largest cigar factory in the country, and could be the largest cigar factory in the world. Flor de Copan is far smaller, but also makes many cigars.
  • The cigar brands that come with this deal are considerable, and include the non-Cuban versions of Montecristo, Romeo y Julieta, H. Upmann, Henry Clay and many more.
  • The retail organization JR Cigar, among the top Internet cigar retailers in the U.S.
  • The chain of Casa de Montecristo cigar stores, high-end stores spread around the U.S. In October, there were 28; one is expected to open soon in Puerto Rico.

The buyers created investment vehicles to make the deals.

“They wish to remain private and anonymous,” said Alex Parsons, a spokesperson from Imperial Brands. “We’re not able to say anything.” Parsons said this deal was a long time in the making, one that drew many potential bidders early on.

“This is a prized asset,” said Parsons. “It generated a lot of interest, which is one of the reasons it took so long.” The Cuban assets, he said, also complicated the deal, and the pandemic slowed things down in the end. 

Imperial Brands, which is headquartered in Bristol, United Kingdom, is one of the world’s largest tobacco companies, with revenues of £31.6 billion ($41 billion). In addition to the cigar division that it just sold, the company also makes cigarettes, mass-market cigars and vaping products. It also has a logistics business. Its brands include Winston, Kool and Salem cigarettes, as well as Dutch Masters and Backwoods mass-market cigars and Blu electronic cigarettes.

Imperial called this transaction a disposal that “reinforces Imperial’s focus on simplifying its business and realizing value for shareholders.” Imperial Brands acquired Altadis S.A. in 2007 for 16.2 billion euros, or $22.4 billion at the time. In April 2019, Imperial announced it was selling the premium cigar business, calling the move part of a £2 billion ($2.6 billion) divestment program. Recently, the company has been experiencing decreased earnings in the wake of the bad press about vaping in the U.S.

This sale comes amidst a time of great change at Imperial. In February the company got a new leader, CEO Stefan Bomhard, who replaced longtime CEO Alison Cooper—who had been with the company for 20 years. In October 2019, it was announced that Cooper would be stepping down, news that came one week after Imperial announced a “marked slowdown” in the growth of vaping products in the U.S. that would result in the company’s business growing “below expectations.”

Cuba Altadis U.S.A. Inc. Habanos S.A.

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