Hong Kong - Shares in Japan Tobacco plunged on Wednesday after it announced it was paying $5 billion in cash to buy the international rights to Natural American Spirit from Reynolds American. Japan Tobacco stock ended the day down 6.7 percent, while the benchmark Tokyo stock market indicator jumped 2.7 percent. Analysts said investors were worried that Japan Tobacco was paying too much in the deal. "We think the investors could be negative over the near term," wrote Masashi Mori, an analyst at Credit Suisse, noting that the acquisition seemed "exceptionally pricey." But he also said Japan Tobacco had a good track record with acquisitions. Reynolds American is keeping the rights to Natural American Spirit within the United States Buy A Carton Of Newports Online, holding them with Santa Fe Natural Tobacco Buy Newports Online Cheap, a Reynolds American subsidiary. "Natural American Spirit, which has a strong and international presence in a premium priced category, will allow the JT Group to further extend its brand portfolio Cigarette Tobacco For Sale," Mitsuomi Koizumi, the president and chief executive of Japan Tobacco, said in a news release. Analysts at Goldman Sachs noted on Wednesday that even though overall demand for cigarettes was shrinking, the brand performed well in the high-priced market and among young people. That could help Japan Tobacco in these sectors. But they added that there were not enough details in Japan Tobacco's business plans to support the acquisition price. Newsletter Sign Up "We will look for details of the plan with RAI and pace of business development in Japan and believe volume and manufacturing profits will need to reach a larger scale for the acquisition to have an impact on profits Marlboro Cigarettes Price," they wrote, referring to Reynolds American by its stock symbol. Nomura estimated on Wednesday that based on current sales of 3.1 billion cigarettes in Japan in 2014 and an average annual growth in sales volume over the past year of 36 percent, further growth is possible if Japan pushes hard in sales and marketing. Natural American Spirit employs about 150 people in its sales office in Japan and spends little on marketing, Nomura said. Nomura judged that the acquisition looked overpriced, but said it "might be justified over the medium term," especially if the company brought production in-house. Reynolds American, which also owns the Camel and Pall Mall brands, said it would be better for the company to sell the international rights than to invest in infrastructure to expand the brand outside the United States. "When backed by the strength of the JT Group's international distribution, sales force and manufacturing capabilities, we believe that growth trajectory will not only continue, but accelerate," Susan M. Cameron, the president and chief executive of Reynolds American, said in a news release. The deal is subject to regulatory approval and is expected to close in 2016 Good Marlboro Cigarettes. Reynolds American purchased its smaller rival Lorillard this year in a $27.4 billion deal in an effort to compete with its rival, the Altria Group. As part of that deal, it sold brands and assets including Salem, Winston and blu eCigs to the Imperial Tobacco Group of Britain for $7.1 billion.
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