The pending acquisition of Altadis S.A. by Britain's Imperial Tobacco PLC would instantly transform Imperial -- the world's fourth largest tobacco company -- from a bit player in the cigar business to the world leader. Yet a key segment of the Altadis cigar business might not come along for the ride should the acquisition go through.
The global star of the Altadis cigar business is its 50 percent ownership of Habanos S.A., the worldwide distributor of Cuban cigars. Altadis bought half of Habanos for $477 million in 2000. But the joint venture includes a change of control clause, which the Cubans could exercise once Altadis is officially owned by Imperial.
Imperial's chief executive officer, Gareth Davis, said in a conference call yesterday that he intends to travel to Cuba and meet with the Castro government to secure support for the deal and keep Habanos from exercising its change of control clause. "He did say he would be heading to Cuba," confirmed an Imperial spokesman. "We don't think there will be any issues."
"We are hopeful that the change of control clause will not be exercised," said Davis, as quoted in The Times Online. "We hope this joint venture will continue to go from strength to strength -- it's a business we plan to invest in."
Imperial is clearly concerned with keeping Habanos, which is the distributor of all of Cuba's cigars, including such famed names as Montecristo, Cohiba, Romeo y Julieta and H. Upmann. "These [are] iconic brand names, very aspirational, almost luxury brand names known around the world," said Davis at a press conference where the deal was announced.
The Imperial spokesman said there was no timetable for the Cuba trip, and hinted that it would not happen for some time.
For more on the Imperial acquisition, see the next issue of Cigar Insider.