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RJ Reynolds Awaits Reply on Santa Fe Tobacco Purchase

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CHICAGO -- In an effort to expand its share in the premium tobacco market, R.J. Reynolds Tobacco has offered $320 million to acquire Santa Fe Natural Tobacco. Rothmans has not yet responded to the RJR bid, which was announced Nov. 22.

The offer comes after Rothmans of Canada proposed a $275 million acquisition last month.

The privately held company manufactures Natural American Spirit, a brand that boasts its ingredients are completely natural and free of additives. The high-margin smoke, which includes herbal and organic extensions, is an appealing target with a customer base of affluent smokers mostly between 30 and 49 years old. While Santa Fe?s advertising philosophy relied mainly on word of mouth and eschewed using lifestyle images or cartoons, sporting event sponsorships and vending machine sales, its product roster is familiar territory to RJR marketers who have rolled the No Bull positioning for additive free Winston and spice extensions for Camel.

Santa Fe?s distribution touches all 50 states and such world markets as Japan, Australia, continental Europe and the United Kingdom. U.S. market share, ranging between 0.22% and 0.25%, would gain more shelf exposure through the No. 2 tobacco company?s distribution network. The transaction is subject to various conditions, including approval by Santa Fe shareholders and regulatory sanctions. If approved, Santa Fe would continue to operate from its Santa Fe, N.M., headquarters as a wholly owned, independent subsidiary of RJR.