The Group ceased to be the controlling company of British American Racing (Holdings) Limited (BAR) on 8 December 2004, when BAR went into administration. The Group consequently ceased to consolidate BAR from that date. On 7 January 2005, BARH Ltd. (BARH), a newly formed joint venture between British American Tobacco and Honda Motor Co. Ltd, acquired the BAR business. On 4 October 2005, the Group announced that it had agreed the sale of its 55 per cent shareholding in BARH to Honda and the sale was completed on 20 December 2005. As a result of these transactions, a gain of £5 million was included in profit from operations. For the period 7 January 2005 to 20 December 2005, BARH was equity accounted reflecting shared control with Honda.
On 21 October 2005, the Group announced the exercise of its pre-emption rights over shares in Skandinavisk Tobakskompagni AS, its Danish associate company, and the transaction was completed on 12 December 2005. This increased the Group’s holding from 26.6 per cent to 32.3 per cent at a cost of £95 million, resulting in goodwill of £69 million.
On 25 November 2005, the Group acquired Restomat AG, the largest operator of cigarette vending machines in Switzerland, at a cost of £25 million, resulting in goodwill of £7 million.
On 10 March 2006, the Group’s Italian subsidiary signed an agreement to sell its cigar business, Toscano, to Maccaferri for €95 million. The sale was subject to regulatory and governmental approval and was completed on 19 July 2006. This agreement resulted in the recognition of an impairment charge of £15 million.
From August 2006, the Group purchased minority interests in its subsidiary in Chile for a cost of £91 million, raising the Group shareholding from 70.4 per cent to 96.5 per cent. The goodwill arising on these transactions was £80 million and the minority interests in Group equity were reduced by £11 million.
On 31 May 2006, the Group’s associate, Reynolds American, completed the acquisition of Conwood, the second largest manufacturer of smokeless tobacco products in the US, for US$3.5 billion. The acquisition was funded principally with debt, and the fair value of assets acquired and liabilities assumed was US$4.1 billion and US$0.6 billion respectively.