Buying Britain’s Gallaher for about ¥2.25 trillion — pillars in Europe and Russia (2006)

The second step that cemented a global top-three

What makes this acquisition interesting is that JT could step into a second, larger bet on the strength of the first one’s proven results. The RJR Nabisco purchase had been a leap to the scale of a global tobacco maker; an investment first called “reckless” was rewarded, by the year to March 2006, with $567.6M (¥66bn) in overseas operating profit. That track record became the argument for the Gallaher deal, roughly twice the size. Leap to the global top three on the first step, then stack the geographic pillars of Europe and Russia on the second — JT’s overseas M&A took the form of an accumulation that advances to the next scale on the security of the last success.

Still, this path is not a purely bright story, premised as it is on domestic contraction. As long as tobacco is the core, the markets where demand grows lie only abroad, and while JT kept buying scale overseas it kept closing factories and cutting jobs at home. The European and Russian base gained through Gallaher became the platform for closing the gap on the leader, Philip Morris, and the number two, BAT, and made firm the overseas-M&A line that runs on to the US Vector acquisition of 2024. Carrying a two-front burden — shrinking at home, growing abroad — JT holds its standing as one of the world’s tobacco majors.