JT’s acquisition of Vector Group in the US: strategic expansion or short-term boost?

While the acquisition of US tobacco company Vector by Japan Tobacco (JT) Group will add profit and cashflow to JT’s business immediately, its longer-term significance may be more strategic.

Vector Group (VGR), the fourth-largest tobacco company in the US, is being acquired by JT in a deal valued at approximately $2.4bn (JPY351bn). The company is likely to invest in growing Vector’s traditional cigarette brands, while using the acquisition as a platform to expand its reduced-risk products in the US. Although Vector has not been active in the heated tobacco space, JT could leverage this acquisition to introduce its reduced-risk products, strengthen its position in this emerging sector and open new distribution channels for JT to advance its heated tobacco offerings.