Imperial Brands has made a move on the world’s largest cigarette market through a joint venture with state-owned China National Tobacco (CNTC).
Shares in Imperial, the world’s fourth-largest tobacco company, shot up more than three per cent after the announcement, before closing up 0.95 per cent to 3,626.50p.
CNTC has a hold on more than 20 per cent of the Chinese market, which has annual volumes of close to 2.5 trillion cigarettes.
The joint venture, called Global Horizon Ventures Limited (GHVL), will team up Imperial, the world's fourth-largest tobacco company, and Yunnan Tobacco to drive the growth of Imperial's West and Davidoff brands in China and Yunnan's Jade and Horizon brands internationally.
This builds on years of cooperation which began in 2003 between Imperial and Yunnan Tobacco, China's number one tobacco company.
The long-term joint venture will be based in Hong Kong, and has the potential to create meaningful growth within the first five years, the companies said in a statement.
Further tobacco and next-generation product launches as well as potential merger and acquisition opportunities will be evaluated by GHVL.
Imperial Brands chief executive Alison Cooper and China's State Tobacco Monopoly Administration (STMA) chief commissioner Ling Cheng Xin today endorsed the joint venture.
Cooper said "We're excited by the growth potential offered by this new business opportunity and look forward to seeing our cooperation with our Chinese partners flourish for many years to come."
GHVL has been jointly funded by ITL Pacific HK Limited, a subsidiary of Imperial Brands, and Yunnan Tobacco International Company Limited and Tian Li International Company Limited, both units of CNTC, the operational arm of STMA.
CNTC set up a different joint venture with British American Tobacco in 2013.
Imperial was assisted in the transaction by Vermillion Partners and Allen & Overy.