Denmark-based tobacco giant Scandinavian Tobacco Group A/S has agreed to acquire Royal Agio Cigars for $231 million. Royal Agio, based in the Netherlands, is known for machine-made brands such as Panter as well as the premium cigar line Balmoral, which is rolled in the Dominican Republic.
The transaction, according to STG, will be financed by “cash at hand and debt,” and is expected to be completed in the first half of 2020.
“Royal Agio can provide [STG] access to a strong portfolio and important market positions in key European machine-made cigar markets,” STG said in an official statement. “If the transaction is completed, the proforma combined group net sales for 2018 would be approximately DKK 7.7 billion [$1.1 billion] with a combined workforce of more than 10,000 employees.”
Founded in 1904, family-owned Royal Agio is based in Duizel, The Netherlands and has approximately 3,200 full-time employees. The company reported sales of 133 million euro ($146.5 million) in 2018, with earnings before interest, taxes, depreciation and amortization of 18 million euro (nearly $20 million).
Boris Wintermans, CEO of Royal Agio Cigars, said in a statement: “This decision has not been easy. We have a wonderful company with highly committed employees and loyal business partners, some of whom have been working with us for over 50 years. But the combination of the two companies will be in a better position to deal with the financial consequences of ever-increasing legislation and regulations.”
Royal Agio claims to produce more than 770 million cigars per year (most by machine), and exports its products to more than 100 countries. Its machine-made brands include Panter, Mehari’s and Agio Tip. Royal Agio’s premium cigar brands, Balmoral and San Pedro de Macorís, are made in the Dominican Republic. For a brief time, Balmoral was distributed in the U.S. by Drew Estate. Royal Agio took back distribution of Balmoral in 2017.
Niels Frederiksen, CEO of STG, said: “I am very pleased and proud that we have taken this important step towards an acquisition of Royal Agio. If completed, the acquisition will be an important step in our ambition of becoming the global leader in cigars.”
Scandinavian Tobacco Group is among the giants of the cigar industry, responsible for such brands as Macanudo, La Gloria Cubana and CAO through its subsidiary General Cigar Co. The company had sales of 6.7 billion Danish kroner ($987 million) in 2018, up 3.9 percent from the 6.46 billion DKK ($952 million) reported in 2017. The company’s profits rose by 2.7 percent, to 3.219 billion DKK ($474 million), while organic gross profit was flat, at 3.282 billion DKK ($484 million). The term “organic gross profit” indicates the profit margin independent of the 2018 acquisition of cigar retailer Thompson & Co.