Who will buy West?

THE German tobacco company Reemtsma Cigarettenfabriken GmbH, the owner of the West brand of cigarettes, has enlisted investment bank Merrill Lynch to sell the company as the market conditions are not very suitable for a planned flotation.

Reemtsma is the world's fourth largest cigarette company and is the major sponsor of the McLaren Mercedes Formula 1 team. It is currently owned by the German coffee company Tchibo Holding AG, which is controlled by Gunther Herz and his family, one of Germany's wealthiest. West has been sponsoring McLaren since 1997 and the program has been very successful particularly in the former Eastern bloc countries.

Reemtsma is now reckoned to be worth around $6bn and it is expected that the big three tobacco companies: Philip Morris, British American Tobacco and Japan Tobacco will all be interested although there is speculation that Altadis SA, the Franco-Spanish cigarette company may be willing to pay more as it needs to expand to be competitive. It is a similar story with Imperial Tobacco, which has just overtaken Gallaher's to become the market leader in Britain.

A long-term sponsorship deal is in place with McLaren but changes of ownership are always worrying for race teams as it is hard to predict if the new owners will view F1 in the same way as their predecessors. Philip Morris and BAT are already involved in F1, Japan Tobacco (Mild Seven) may be pulling out because of the switch from Benetton to Renault Sport. Altadis (Gauloises) has already left F1 and Imperial has not been involved in Grand Prix racing for some years.

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