26 Jun 2000

Gallaher acquire the leading Russian Cigarette Manufacturer and Distributor for £260.3 Million

Simmons & Simmons recently advised Gallaher, the largest manufacturer of tobacco products for the UK and the leading tobacco company in the Republic of Ireland, on its proposed acquisition of Liggett-Ducat Ltd from Vector Group Ltd for US$390.5 million (£260.3 million) in cash. The deal includes the assumption of debt as at 31 March 2000 of US$56.4 million (£37.6 million).

Liggett-Ducat is the leading cigarette manufacturer and distributor in Russia with a current market share of 17 per cent. Russia is the world's fourth largest cigarette market with total annual volumes estimated at 260 billion units in 1999. Last year Liggett-Ducat opened a new, state of the art manufacturing plant outside Moscow, which has current production rates in excess of 40 billion units annually. Liggett-Ducat's key brands include Prima, Novost and LD.

The acquisition of Liggett-Ducat is a significant step in the implementation of Gallaher's international strategy to develop a portfolio of interests in established and transition markets with growth prospects. The combination of the businesses of Gallaher and Liggett-Ducat will enable the enlarged group to realise cost savings and benefit from the development of Sovereign and Sobranie, Gallaher's existing brands in the Russian market.

The transaction is conditional, inter alia, upon Russian antitrust and environmental approvals and is expected to complete in the third quarter of 2000.

Simmons & Simmons advised Gallaher on this transaction, together with US law firm Chadbourne & Parke, who acted as US and Russian counsel. The Simmons & Simmons team was led by Corporate partner Ken Woffenden, and included partner Nick Cronkshaw (Tax). The Chadbourne & Parke team was led in New York by partner A Robert Colby and in Moscow by partner Laura Brank.

Ken Woffenden, head of Simmons & Simmons Corporate Transactions Group, said:

"This is a landmark deal for Gallaher and we are delighted to have had the opportunity to help make it happen".

Notes for editors:

Simmons & Simmons is worldclass law firm with offices in London, Paris, Brussels, Düsseldorf, Lisbon, Milan, Rome, Madrid, Abu Dhabi, Hong Kong, Shanghai and New York with over 1,400 staff worldwide. For further information on Simmons & Simmons please visit our website at

2. The Corporate Department at Simmons & Simmons comprises over 220 legal staff (115 in London), including 47 partners (27 in London). It advises on the whole range of corporate finance activity, and mergers and acquisitions as well as other corporate law matters for listed and unlisted companies, in the United Kingdom and overseas.

3. Gallaher is the largest manufacturer of tobacco products for the UK, and the leading tobacco company in the Republic of Ireland. The Group has an existing strong international presence, in particular in selected markets in continental Europe, the CIS and Asia Pacific. Gallaher's key brands are Benson and Hedges, Silk Cut, Mayfair, Sovereign and Sobranie. Simmons & Simmons has acted as English legal advisers to Gallaher since its demerger from American Brands in 1997.

For further information, please contact:
Ken Woffenden, partner and Head of Corporate Transactions Group
Louise Resnick, Media Relations Manager