IMPERIAL TOBACCO GROUP PLC

On 15 July 2014, Imperial Tobacco Group PLC (the "Company") announced that a subsidiary of the Company ("ITG Brands") had entered into a purchase agreement with Reynolds American Inc. ("Reynolds") for the acquisition of certain US cigarette and e-cigarette brands and assets currently owned by Reynolds and Lorillard, Inc. ("Lorillard") (the "Transaction"), following the proposed acquisition of Lorillard by Reynolds (the "Acquisition").

On 28 January 2015, at a General Meeting of the Company, the ordinary resolution to approve the Transaction was passed by shareholders. The US Federal Trade Commission ("FTC") subsequently gave its approval for the Acquisition on 27 May 2015, subject to a consent order requiring the Transaction to be completed, and on 8 June the United States District Court for the District of Columbia approved the sale of the acquired US cigarette brands to ITG Brands in accordance with the Department of Justice case involving those brands.

The Company is pleased to announce today that the Transaction is now complete following fulfilment (or, where applicable, waiver) of the other conditions set out in the Asset Purchase Agreement, as described in the circular to shareholders dated 15 December 2014.

The assets have been acquired for a consideration of $7.1bn (£4.6bn) or $5.6bn (£3.6bn) after adjusting for the present value of expected tax benefits of c$1.5bn.

Acquisition rationale

·      Builds on Imperial's strategy of investing in Growth Brands and Growth Markets

·      Increases diversity and sustainability of Group cash flow and returns

·      Returns expected to be over 10%, well in excess of weighted average cost of capital in first full financial year 

·      Transforms Imperial into a major US competitor with c10% cigarette market share and national distribution

·      Strengthens brand portfolio, sales capability and infrastructure, enhancing retail relevance

·      Opportunity for enhanced opportunities in e-cigarettes through blu

ITG Brands

·      Enlarged US business will be known as ITG Brands and will be headquartered in Greensboro, North Carolina

·      Experienced management team appointed, led by CEO David Taylor, former CFO of Lorillard

·      Commercial and operational strategies fully defined; plans for portfolio investment, route to market and infrastructure in place and integration plans now being executed

·      Given the increased scale and prominence of the ITG Brands business we will, from our 2015 full year results, disclose the US as a separate reportable segment (US is currently within Growth Markets)

Management Changes

The following appointments have been made to ensure the right management structure is in place to lead the enlarged Group:

Matthew Phillips, previously Corporate Affairs Director and a member of the Imperial Tobacco Board for the past three years, has been appointed Chief Development Officer. In this new role, Matthew will be responsible for corporate development and Fontem Ventures, including blu. He will also retain his corporate and legal affairs responsibilities and will continue to report to Alison Cooper, Chief Executive.

Arthur van Benthem, previously Group Sales Director, is appointed CEO of Fontem Ventures. Responsibility for our global tobacco sales activities will be split across three division leaders reporting to Alison Cooper, withAmal Pramanik continuing to lead the Growth Division, Dominic Brisby continuing to lead the Returns Division and David Taylor leading the US business, ITG Brands.

Alison Cooper, Chief Executive of Imperial Tobacco, said:

"I'm delighted to announce the completion of this deal, which will transform our position in the US and generate significant returns for our shareholders. We will focus on leveraging our enhanced scale and capabilities to maximise growth opportunities for our portfolio and establish ITG Brands as a major competitive player in the US tobacco market. I'm also pleased to announce senior appointments that will strengthen our management structure and ensure that it is aligned with the Group's on-going international development." 

Webinar call

Imperial Tobacco Group PLC will be holding a webinar call for investors and investment analysts with senior management on Monday 15 June 2015. The call will be hosted by Alison Cooper, Chief Executive, Oliver Tant, Chief Financial Officer and Matthew Phillips, Chief Development Officer, and will commence at 15:00 BST.

Please register to access slides via the following web link: https://pgi.webcasts.com/starthere.jsp?ei=1068123

Alternatively slides will be available to download in PDF format shortly before the call from our website www.imperial-tobacco.com

Accompanying audio for the call can be accessed by dialling the following numbers and entering the conference ID.

Call-in Details

UK number*:                              +44(0)20 3427 1902

US number*:                              +1212 444 0481

Conference Call ID:                  6130181

Start time:                                   15:00 BST (please dial in 10 minutes before start time)

*For telephone numbers from all other geographies and replay numbers, refer to final page of this release.

Replay

A replay facility will be available for 14 days 24 hours after the conclusion of the call (see replay number below) as well as a downloadable audio file.

Notes to Editors

Imperial Tobacco Group PLC is a multi-national tobacco company, with international strength in cigarettes and world leadership in fine cut tobacco, premium cigars, rolling papers and tubes. The Group has 44 manufacturing sites and around 32,000 employees and operates in over 160 markets.

In 2013, the Company realigned its geographic footprint into Growth Markets and Returns Markets and now manages markets based on the strategic role they play, rather than their geographic proximity. Growth Markets are characterised by large profit and/or volume pools. We tend to have shares below 15 per cent and see considerable opportunities for share and profit growth over the long term. Our main Growth Markets include the USA and selected markets in the EU, Eastern Europe, Asia, and the Middle East. We measure the performance of our Growth Markets against market share and revenue metrics and our quality of growth by the progress our Growth Brands are making.

In Returns Markets we have relatively large shares, mostly above 15 per cent. Our objective is to maximise profit, whilst actively managing our market share. Our main Returns Markets include UK, Germany, and other markets in the EU, Australia, Eastern Europe and Africa. We measure the performance of our Returns Markets against market share and revenue metrics and our quality of growth by the progress our Growth Brands are making.

In accordance with LR10.4.2R(2), the Company confirms that, save as disclosed in this announcement, there has been no significant change affecting any matter contained in the announcement dated 15 July 2014 and no other significant new matter has arisen which would have been required to be mentioned in that announcement if it had arisen at the time of its preparation.

Information regarding forward-looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include, but are not limited to, statements regarding Imperial's intentions, beliefs or current expectations concerning, among other things, Imperial's business, results of operations, financial position, prospects, growth, strategies and the industry in which it operates as well as those of the Reynolds and Lorillard assets that are the subject of the Transaction. By their nature, forward looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of Imperial's operations and financial position, and the development of the markets and the industry in which Imperial operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this announcement. The same applies in respect of the Reynolds and Lorillard assets that are the subject of the Transaction. In addition, even if the results of operations, financial position and the development of the markets and the industry in which Imperial operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, changes in regulation, currency fluctuations, changes in its business strategy, political and economic uncertainty and other market conditions. Forward-looking statements may, and often do, differ materially from actual results. None of the future projections, expectations, estimates or prospects in this announcement should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in this announcement. Any forward-looking statements in this announcement speak only as of their respective dates, reflect Imperial's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to Imperial's operations, results of operations and growth strategy. As a result of these risks, uncertainties and assumptions, the recipient should not place undue reliance on these forward-looking statements as a prediction of actual results or otherwise. You should specifically consider the risk factors that may affect Imperial's operations which are described under "Risk Factors" in the Company's 2014 Annual Report, which could cause actual results to differ as well as those of the Reynolds and Lorillard assets that are the subject of the Transaction. Subject to the requirements of the FCA, the London Stock Exchange, the Listing Rules and the Disclosure and Transparency Rules (and/or any regulatory requirements) or applicable law, Imperial explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this announcement that may occur due to any change in Imperial's expectations or to reflect events or circumstances after the date of this announcement. No statement in this announcement is intended as a profit forecast or profit estimate and no statement in this announcement should be interpreted to mean that the earnings per share of Imperial, as altered by the Transaction, will necessarily match or exceed the historical or published earnings per share of Imperial or the relevant entities which form the basis for the Transaction.  This announcement has been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this announcement is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

Call-in Details

Replay Numbers(available from 15:00 on 16 June 2015 for 14 days)

Replay Passcode: 6130181