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Gallaher in European joint tobacco venture with RJ Reynolds

NEW YORK - British tobacco company Gallaher Group has formed a joint venture with American rival RJ Reynolds, which makes Camel cigarettes, worth an estimated $200m (£127m) to market American blend cigarette brands in Europe.

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The joint venture deal is designed to help Gallaher grow in markets where it has little presence. The brands included in the deal include Benson & Hedges American Blend, Benson & Hedges Red and Reynolds, a new American blend in a unique "slide-box" pack.

The deal initially covers four markets: France, Spain, Canary Islands and Italy. Certain markets, most notably Austria, are excluded from this agreement.

RJ Reynolds' financial contributions -- which are expected to total in the region of $75m-$100m over the next five years -- will balance Gallaher's contributions, which will include the value of the volume sales already being achieved by the Gallaher brands licensed to the joint venture.

The joint venture company, RJ Reynolds-Gallaher International SARL, will be headquartered in Switzerland. The joint venture company will receive manufacturing, sales, distribution and marketing support services from Gallaher.

Commenting on the joint venture, Nigel Northridge, chief executive of Gallaher, said: "It will build on our solid foundation in Europe, accelerating Gallaher's growth in those markets where we are still relatively small. The joint venture's strengthened resources will benefit Benson & Hedges American Blend and Benson & Hedges Red, and Reynolds -- with its innovative packaging -- will complement our existing brand portfolio. I expect this joint venture to enhance earnings in the medium term."

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