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February/
March 2000

RETAILER & TOBACCO INDUSTRY NEWS

Hoja's Universal Cigar, Tony Borhani Cigars in Alliance
All Hoja Production Moves to Tabacalera Tambor Factory


LOS ANGELES, CA - Universal Cigar Co., manufacturer of Hoja Cigars, has formed an alliance with Tony Borhani Cigars and the Tabacalera Tambor factory in Costa Rica. Under the agreement, Tabacalera Tambor - the exclusive maker of Bahia Cigars - will manufacture the entire Hoja line including Hoja Yellow Band and Hoja 1965. The Hoja XXO by Tony Borhani is already rolled at Tabacalera Tambor. The entire Hoja line will be featured in new packaging and will be released early this year.

Universal Cigar says the alliance will allow it to expand the Hoja brand into more territories in the domestic marketplace. Currently, demand for the company's cigars has soared beyond production, it says.

"We are extremely pleased about the alliance with Tambor. The products coming out of this factory are some of the finest outside of Cuba," said Edward Nikka, president of Hoja Cigars. "There is in excess of $25 million of tobacco inventory and cigar aging rooms holding cigars for six months. The products are breathtaking."

Tabacalera Tambor of Costa Rica is jointly-owned by "Don" Douglas Puerenger and Tony Borhani, president of Tony Borhani Cigars and founder of the Bahia brand.


Nick's Named Official Cigar Maker of AmericanAirlines Arena

MIAMI, FL - Nick's Cigar Company has been chosen as the official cigar maker of the N.B.A. Miami Heat's new home, the AmericanAirlines Arena. Under the agreement, Nick's Cigar Co. becomes one of only three cigar manufacturers in the country to have a significant presence at a professional sports venue. Financial terms were not disclosed.

As part of the agreement, Nick's Cigar Co. will be responsible for manufacturing a special cigar blend that will serve as a private brand for the AmericanAirlines Arena. This limited edition cigar, along with several brands manufactured by Nick's including Perdomo Reserve and Perdomo2, are available exclusively to season ticket holders in the arena's luxury suites and premium seating areas. In addition, all ticket holders may purchase brands manufactured by Nick's from the company's new cigar outlet located along the arena's bayside concourse, or from any of the nostalgic cigar hostesses strolling the arena's designated smoking areas.

The new Nick's Cigar Co. Outlet will also be open for special events held at the AmericanAirlines Arena, including concerts and other sports and entertainment-related events.

"We're extremely proud to be associated with the two crown jewels of the NBA, the AmericanAirlines Arena and the Miami Heat," said Nick Perdomo, Jr., president and c.e.o. of Nick's Cigar Co. "We're very excited to contribute to the whole experience of watching an NBA game in America's cigar capital."

"When it came down to choosing a world-class cigar manufacturer, we didn't have to look far," said Steven A. Weber, senior vice president of sales for the AmericanAirlines Arena. "We're very serious about providing our fans with only the very best.


WASHINGTON, DC - President Clinton's 2001 budget proposes a $3,000 "assessment fee" for every smoker under age 18 be put in place starting in 2004 if youth smoking has not been cut in half. In addition, the budget includes an additional 25 cent-per-pack excise tax beginning in fiscal 2001, and "comparable increases" in the price of other tobacco products including cigars and smokeless tobacco. It would also move up an already legislated five cents per pack cigarette increase from January 1, 2002 to October 1, 2000.

Swedish Match Buys Controlling Stake in General Cigar; Cullmans Remain at Helm

STOCKHOLM - Swedish Match A.B., the world's second-largest cigar producer, has agreed to purchase a 64 percent stake in U.S. premium cigar maker General Cigar Holdings, Inc., boosting its position as a major player in the U.S. cigar market.

Swedish Match said that it would invest $170 million in the merger deal, which is part of its strategy to focus on its key business areas - cigars, smokeless tobacco, and pipe tobacco. General Cigar will not be publicly traded after the deal is completed.

"This provides an opportunity to jointly develop and expand our global position for some of the world's greatest cigar brands," Swedish Match president and chief executive Lennart Sunden said in a statement.

The merger, which follows Swedish Match's $200 million acquisition of General Cigar's mass-market brands in early 1999, is seen as an important step in the consolidation of the world market.

Lennart said that Swedish Match would seek further acquisitions and would consider buying back some of its own shares if this was not possible.

"We will continue to look for acquisitions in our main areas - smoke-free tobacco, cigars, and pipes. We may also be looking for deals within the match and lighter sector," he told Reuters.

Swedish Match has repeatedly said it is not interested in a mega-merger and will keep its number two global position, even after the merger of Spain's Tabacalera and France's Seita to form Altadis.

Cigar sales accounted for about 13 percent of Swedish Match's total 1998 sales, estimated at $1 billion. The world cigar market is worth around $6 billion. Premium cigar sales are expanding by around two to three percent globally, while mass market cigars are growing by around nine percent. "It's a fair deal and should add around $140 million to annual turnover, although we shouldn't expect too much in terms of growth in the premium cigar sector in the United States," said Handelsbanken food and beverages analyst Robert Gartner.

Swedish Match said the $170 million it was investing in the deal would pay for all of the shares it was buying from the Cullman family, which has managed the company since 1961, and would help finance the purchase of all the outstanding non-family shares.

The remaining 36 percent stake would remain with the Cullman family, which would continue as the company's managers.

"With the cigar market becoming more global, Swedish Match's interest in our premium cigar business has...allowed us an opportunity to improve our shareholder value significantly," General Cigar's chief executive Edgar Cullman said.

The merger requires the approval of General Cigar's stockholders. The board of directors of General Cigar unanimously approved the merger. A special stockholder transaction is expect later in the spring.

Chewing tobacco is the cornerstone of Swedish Match's operations in the United States. Its brands dominate the market, led by Red Man - the leading chewing tobacco brand in the U.S. The company holds 10 percent of the total market share in pipe tobacco, and its Borkum Riff is the leading brand worldwide.

The company's fastest-growing product category is moist snuff, its largest brands domestically being Timber Wolf and Renegades. Swedish Match is also the third largest producer of disposable lighters, notably the Cricket brand, and it is also a global manufacturer of matches.

General Cigar Holdings, Inc. dates back to 1906, and manufacturers and markets its own premium cigar brands including Macanudo, Partagas, and Cohiba. It is a major grower of high-quality Connecticut shade wrapper tobacco, and operates the Club Macanudo cigar bars in New York City and Chicago. Among its holdings is Villazon & Company, Inc., which traces its roots to 1886, itself a leading manufacturer and marketer of premium cigar brands including Punch, Hoyo de Monterrey, and Excalibur.



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