It has been learned from the Zhitong Finance APP that Japan Tobacco Company (Japan Tobacco) has acquired Vector Group's outstanding shares for $15 per share in cash. The total equity value of the transaction is approximately $2.4 billion, excluding redemption or debt repayment. The boards of directors of both companies have unanimously approved the merger agreement. After the completion of the transaction, Vector Group will become a wholly-owned subsidiary of Japan Tobacco.

This acquisition is considered to be in line with Japan Tobacco's tobacco business strategy. This acquisition is expected to increase a continuously growing and historically profitable business, and is expected to improve the company's return on investment in combustible tobacco. This transaction will greatly expand Japan Tobacco's business in the United States, which is the second largest tobacco market in terms of net sales and one of the most profitable tobacco markets in the world. In addition, it is expected to strengthen Japan Tobacco's financial position through medium to long-term hard currency profits and cash flow.

According to Morgan Stanley, their initial impression of this transaction is slightly positive because it will allow Japan Tobacco to gain a business with a relatively high gross margin and provide sales growth. This acquisition is expected to increase earnings per share from the first year of integration.

Analyst Haruka Miyake pointed out that the U.S. tobacco market is experiencing a significant decline in demand, with significant growth in the deep discount category. However, Vector Group (VGR) has achieved market share and revenue growth by strategically gaining sales share and increasing prices with multiple brands.

As for the impact on the industry, British American Tobacco and Imperial Brands PC are not expected to participate in and/or attempt to intervene in the transaction, as this could disrupt the ability of both companies to buy back stocks at their current pace. Miyake emphasized: "In addition, both companies view strengthening through mergers and acquisitions as part of their capital allocation policies, with a focus on expanding into new categories and/or beyond nicotine business."

Acquiring Vector Group will allow Japan Tobacco to have a market share of about 8% in the United States, as it will acquire two of the top ten cigarette brands in the country.

Bloomberg Intelligence analyst Duncan Fox said, "Despite double-digit declines in cigarette sales, strong pricing will enable the company to generate significant cash for future investments in US assets to mitigate risk."