BAT Plans to End Cigarette Manufacturing Agreement with Reynolds

Source from:  Winston-Salem Journal 01/11/2016

R.J. Reynolds Tobacco Co. said in a regulatory filing Friday that it has been given notice of a planned termination of a cigarette-manufacturing agreement by its largest shareholder in January 2019.

The notice, filed Monday, came from B.A.T. Ltd., a wholly owned subsidiary of British American Tobacco PLC, which owns 42 percent of Reynolds' outstanding stock.

Reynolds currently is the exclusive manufacturer of all of B.A.T. Ltd.'s requirements for certain American-blend cigarettes for distribution and sale in Japan through BATUS Japan Inc.

B.A.T. Ltd. provided its notice six days after it could do so under the agreement, which required a three-year notice from either party on terminating the agreement.

Reynolds spokesman David Howard said Friday that the company has done contract manufacturing for BAT for more than a decade.

The companies initially entered the BATUS Japan agreement in January 2010. They extended the agreement in December 2012 and revised it on May 14.

The December 2012 agreement also modified agreement terms affecting: product pricing; cost-savings initiatives: the manner in which BATUS provides Reynolds with periodic product volume forecasts; the sourcing of raw materials; and new product launches.

"We do not expect this to have any impact on jobs at R.J. Reynolds Tobacco, nor do we expect this to have a material impact on company financials," Howard said.

"Reynolds has enjoyed a great partnership with BAT, providing superior quality and services. This provides the opportunity for the company to continue focusing on projected volume growth of its key brands moving forward." Enditem