Japan Tobacco (JAPTOB; A2/ A+) $2.4b acquisition of VGR

101 CoC on both the $VGR 26 and the 29s; {BN464383 Corp}. We see it worth slightly more (5bps) on 29s than the 7-notch composite rating uplift into the $JAPTOB curve.

The news; Japan Tobacco is acquiring the 4th largest US Tobacco player (it says) - VGR {VGR US Equity} for $15/share or equity value of $2.4b. We see another $0.85b in net debt leaving total cost/EV at $3.25b. It's only a 7% premium to close price for VGR equity holders. VGR board has already approved, close expected by end of this year contingent on regulatory approvals.

This looks like a combustibles heavy co - not great to see it spending on this segment but JAPTOB is a strong 26% exposed in non-combustibles already. Positively it will move Japan Tobacco's US market share from 2.3% to 8% - it is light in US right now.

JAPTOB had $7.4b of cash on hand at end of June - i.e. it doesn't need to issue for this. No end to consumer M&A it seems. Presser here.