Cigarette-to-hotel-to-FMCG major ITC Ltd on Sunday said it will sell its entire stake in its US-based wholly-owned subsidiary King Maker Marketing (KMM) for an estimated consideration of US$ 24 million.
The Kolkata-based diversified conglomerate entered into an agreement with the US-based buyer, Premier Manufacturing, on Saturday to divest 100% of its equity stake in KMM, which is primarily engaged in distribution of cigarettes in USA. The expected date of completion of sale of the subsidiary is November 30, 2016.
“The Corporate Management Committee has approved divestment of company’s entire shareholding (204 Shares of Common Stock with no par value) in King Maker Marketing, Inc., USA, a wholly owned subsidiary, along with assignment of certain trademarks owned by the company, pursuant to the authority given by the Board of Directors of the company,” ITC said in a stock exchange filing.
“The consideration to be received is estimated around US$24 million in terms of the share purchase agreement and subject to regulatory approvals and customary closing conditions,” the filing added.
Main business of King Maker Marketing, registered in New Jersey, is to import and distribute tobacco products to licensed wholesalers and retailers throughout the USA. ITC is KMM’s sole supplier of tobacco products.
The subsidiary recorded net sales of US$ 32.7 million and earned a net income of US$ 0.53 million during the financial year ended March 31, 2016. During the last fiscal, KMM paid a dividend of US$ 1.5 million to ITC, according to the latest Annual Report of the cigarette major.
The cigarette industry in the USA continues to be adversely impacted by long-term decline in cigarette consumption and growing illicit trade due to tax differential between various States, mislabeled cigarette tobaccos positioned in a lower tax bracket, non-compliant imports and Native American manufacture. Increasing governmental restrictions and tobacco tax increases were further expected to impact industry growth with the threat of shift in consumer franchise to illicit, value offers, ITC said in the annual report.