Imperial Brands finalizes sales
Imperial Brands finalizes sales of its premium cigar division. About half a year ago, the British tobacco giant announced that it sold its premium cigar division to two buyers. The United States-based business is sold to Gemstone Investment Holding. The non-American part is sold to Alliance Limited. Alliance Limited is a Hong Kong-registered company. Yet there are strong rumors that Macau’s gambling billionaire Alvin Chau is involved in the company. It took the companies another six months to finalize the sale.
The American bases businesses, worth 183 million euro include Altadis USA and the American based retail operations of Imperial Brands. That’s the Casa de Montecristo chain. Some Casa de Montecristo stores are operated by franchisers, others are operated by Altadis USA. The second-largest cigar retailer in the world, JR Cigars is also part of the deal.
What did Instant Alliance Ltd buy?
Instant Alliance Limited acquires the remaining part of Imperial Brands premium cigar division for the sum of €1.04 billion. The most important part of the deal is the 50% stake in Habanos. But we get to Habanos later. Because there is more.
First, there is the VegaFina brand. A brand dating back to 1998 when the Spanish tobacco monopoly Altadis launched it. Altadis later became part of Imperial brands after a merger with Seita, the French tobacco monopoly. But that’s not all. The sale also includes the Flor de Copan cigar factory in Honduras. And the largest cigar factory in the world, Tabacalera de Garcia in the Dominican Republic.
But there is more in the deal. The deal includes a 50% stake in the joint venture with Cuba for Cuban machine-made cigars Internacional Cubana de Tabaco S.A. And a 50% stake in the distribution joint venture to distribute those Cuban machine-made cigars, Promotora de Cigarros S.L.
The most important part of the portfolio is the 50% stake in Habanos though. Habanos is a joint venture with Cubatabaco. Cubatabaco manufactures all the premium handmade Cuban Marcus but Habanos is distributing them worldwide. And that’s where the money is in this deal. With little over 90 million cigars sold annually, at usually high prices, there is a lot of money to earn here. And the cash register doesn’t stop ringing there for Instant Alliance Ltd.
Everywhere in the world, there are official and exclusive Habanos distributors. Habanos has stakes in all of those distributors as well. We previously wrote an article to explain what Habanos is. And we also published a list of the percentages of Habanos in each individual Habanos distributor.
The sale brings questions. Are the new owners changing things? In short term, no changes are expected. Cuba can’t produce more cigars than they do right now. Habanos has contracts with most, if not all, Habanos distributors about minimum quantities. So taking away allocations to shift more cigars to China, as many people fear, is not something that we expect real soon. Unless Instant Alliance Ltd is willing to invest to cultivate more soil in Cuba to up the quantity of tobacco grown. But since Habanos is just the marketing and distributing arm, and not into tobacco growing and cigar rolling, that is not a move we expect.
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