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April, 2008

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Wuhan Tobacco Group

Beijing - The Chinese premium cigarette brand Yellow Crane Tower is owned and produced by Wuhan Tobacco Group (WTG), a subsidiary cigarette maker of China Tobacco Hubei Industrial Corp. The brand name originated from a local historical resort with a touching saga about a yellow crane. The legendary story and classical blend are core values of the brand, bringing Chinese consumers a sort of reminiscent, classical, luxurious, delicate, graceful feeling. The design and the package of the brand are very impressive.

The main brands include the 1916, the Beyond, the Fragrance, and the Tao Way.

The 1916 commemorates the year when the original cigarette company was established, combining the moral of the legendary classics with modern scientific modification of the blend and packing. More than 27 patent technologies are used in the creation of this product. It has been one of the top premium brands in China market.

The Beyond, meaning roaming around and going beyond, uses the shapes and colors of crane feathers in its packing design. Low tar and pure flavor are the main appeal of this brand. Even though both the tar content and the carbon monoxide are under 10 mg, the genuine flavor of the tobacco is maintained.

The Fragrance brand stresses the aromatizing process by adding Chinese herbal flavors. It delivers an elegant and natural taste with an effect of total relaxation.

The Tao Way implies the enjoyment of independence and Taoism. The red and black colors with the Chinese calligraphy demonstrate the traditional culture.


Australia
Investor group acquires the majority of Lenzing Paper
Lenzing - The Lenzing Group has announced its intent to transfer 60% of its shares in Business Unit Paper to a group of investors led by Ernst Brunbauer.

The new shareholders will run Lenzing Paper independently of Lenzing Group at its current location in its namesake, Lenzing, Austria.

Lenzing Paper is one of the smallest business units belonging to Lenzing Group, producing 80,000 tons of specialty papers per year in addition to revenue of approximately 60 mn euros.


Germany
Heinen and Köhl merge
Hamburg - Heinen Tobacco and Köhl Maschinenbau have merged their tobacco branches in order to create Heinen Köhl Tobacco GmbH.

This new company incorporates over 100 years of tobacco processing from Heinen with the machinery and logistical knowledge of Köhl.


India
GTC Industries to de-merge into real estate and tobacco
New Delhi - Cigarette manufacturer GTC industries has “in-principal” approval for the de-merging the tobacco business and the real estate business into two separate entities. Sanjay Dalmia, GTC Industries Chairman, said that the de-merger should unlock shareholder values across the tobacco and real estate industries. After the de-merger, GTC would continue to manufacture the brands Panama and Chancellor.

Kenya
BAT to spend KSh100 mn to comply with Tobacco Control Act
Nairobi - It will cost British American Tobacco (BAT) 100 mn Kenyan shillings to comply with the Kenya’s national Tobacco Control Act.

The money is to be used for removing tobacco-related branding on products in outlets and the development of new packaging.

The act aims to ban tobacco advertising, sponsorship and promotions; sale via vending machines and single stick sales to make more difficult the procurement of tobacco for persons under the age of 18.


Nigeria
Lagos re-files tobacco lawsuit
Lagos - The Nigerian state of Lagos has re-filed it’s lawsuit against British American Tobacco (Nigeria) Limited, International Tobacco Limited, British American Tobacco Plc, British American Tobacco (Investment) Limited, Philip Morris International, and the Tobacco Institute for 2.7 tn naira ($22.9 bn).

The new suit has the state government as the only plaintiff, and has been filed through the “Fast Track Courts,” meaning any actions filed should be wrapped up within 8 months.

In addition, the suit asks the court to ban the sale of tobacco products with in a 1000-meter radius of hospitals, theatres, schools, shopping centers, childcare facilities, or public places where persons under the age of 18 congregate.


United Kingdom
BAT to acquire most of Denmark’s ST for $4.1 bn
London - British American Tobacco Plc, has agreed to buy most of Skandinavisk Tobakskompagni A/S for $4.1 bn, gaining 60% of the market for cigarettes in Scandinavia. BAT said it is willing pay 20.3 bn Danish kroner for ST units such as Prince cigarettes and Fiedler & Lundgren, Swedish maker of snus powdered tobacco. BAT already owns 32% of Soeborg ST.

Skandinavisk Holding, ST’s controlling shareholder with 64.7%, will not sell its cigar and pipe tobacco businesses and other units including a Copenhagen amusement park. BAT is paying Skandinavisk Holding 11.3 bn kroner, or 1.15 bn pounds.

ST was formed in 1961 in the merging of three Danish tobacco makers. The company merged with a local BAT branch in 1971, and owns House of Prince, the largest cigarette company in Scandinavia.

BAT is said to be paying 11.2 times the 2007 earnings of ST, cheaper than other recent acquisitions in the industry: Imperial Tobacco Group Plc paid 14.2 times Altadis SA’s while Japan Tobacco Inc. paid about 13.6 times Gallaher Group Plc’s.

BAT aims to reach annual savings of 800 mn pounds by 2012, and also lowered its share buyback target to 400 mn pounds. BAT has been cutting costs significantly over the last few years, totaling 1 bn pounds in costs cut. It no longer has any U.K. factories and is planning to close down a Dutch plant later this year.

Herbert Smith has been named advisor for BAT regarding its interactions with Skandinavisk Tobakskompagni. Smith joins corporate partner Austin Sweeney who has been heading this deal since 2007.

England passed laws in mid 2007 prohibited smoking inside public areas, and France and the Netherlands continue to tighten restrictions.

BAT has also announced that they will be disposing of their stake in Aldeasa, S.A., the Spanish airport duty-free retailer.


European Commission approves disposal of Imperial Tobacco’s stake in Aldeasa
London - Imperial Tobacco’s disposal of its 49.95% holding of Aldeasa S.A. to Autogrill España S.A. has been approved by the European Commission. The transaction will be completed over the next few months.

United States
General Tobacco releases its first US-made product
Mayodan - General Tobacco of North Carolina has started production of Broncos, its first tobacco product made in the United States. Using high-end German engineered equipment, GT intends to follow the Broncos run with the GT One, Silver and 32 Degree cigarettes as well as Vaquero Little Cigars. GT is the one of the ten largest tobacco companies in the United States with annual sales of $300 mn.

In other General Tobacco news, the company recently said that it has added new manufacturing lines at its plant in Mayodan.

Using the new lines, GT has started production on its 100 styles and hard packs. Additional production lines for the GT One, Silver, 32 Degree brand cigarettes and Vaquero Little Cigars are still in the works.


Glatfelter acquires Metallised Products Limited
York - York, Pennsylvania-based Glatfelter, the world-leader in filter paper for tea bags and coffee pods has once again returned to the tobacco industry with its acquisition of UK-based Metallised Products Limited in a $53 mn bid. The purchase expands Glatfelter’s reach into metallic inner-liners for cigarette packs, as well as “creat[ing] a major increase in European production scale, supports revenue, and margin growth in high value niche markets,” according to CEO George H. Glatfelter II.
Tobacco companies may withhold $600 mn from states
Washington - Tobacco companies in the US could withhold approximately $600 mn of agreed upon annual payments to assist in covering medical bills for ailing smokers, according to a report by Herbert J. Sims & Co.

The report says that the companies are challenging the payments under the Non-Participating Manufacturer’s (NPM) adjustment clause.


Philip Morris USA makes MSA payment of $4 bn
Richmond - Philip Morris USA (PM USA) made its annual Master Settlement Agreement (MSA) payment, coming to approximately $4 bn. This includes nearly $156 mn that PM USA disputes regarding the 2005 Non-Participating Manufacturer (NPM) Adjustment.

As with 2003 and 2004, PM USA made these payments instead of putting the money into the Disputed Payments Account.


Tobacco International - April, 2008
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