Castro’s resignation on the U.S. premium cigar

Castro’s resignation on the U.S. premium cigar

Fidel Castro has resigned from the presidency of Cuba. Will be the product of Cuba (Cuban cigars) to enter the United States to have an impact; Castro’s resignation may promote such a change.

Swedish Match

Lehman Brothers on the Swedish Match’s target price is 171 SEK, down 7 SEK dangerous. 7 SEK decrease in revenue is based on the assumption that the Cuban cigar sales in the United States from 2009, and assumed to allow the sale of the Cuban cigars occupy 50% market share of premium cigars, Swedish Match.

The worst case is the Swedish Match will lose 50% of the premium cigar market share, but did not reduce the fixed costs, Lehman Brothers is expected to be earnings per share will be reduced by SEK 17.

However, this prediction ignores the many other factors:

* Swedish Match in the United States has many Cuban brand names, including the controversial Cohiba brand.

Habanos SA, a joint venture (Imperial / Altadis and the Cuban government) only include sales of cigars outside of Cuba but apparently does not include the U.S. market. Expected that the joint venture does not include the U.S. market. Swedish Match tried to set up an independent joint venture company created an opportunity in the United States.

In short, the Swedish Match brought:

U.S. premium cigar network (the premium cigar market share of 35%).

Cuban brand names such as Cohiba.

Try to set up a joint venture with the Cuban government the opportunity to maximize revenue.

From a more easily the knot satisfied the U.S. government to lower the entrance of access to the monopoly of the U.S. market (such as the Cuban government has more than one partners, will make the market more freedom).

Empire Habanos joint venture partners, not too strong relationship with Altadis, Swedish Match may improve relations with Cuba.

Cuban tobacco prices will increase. This will lead to higher prices of all Cuban cigars, Swedish Match sales of non-Cuban tobacco products to provide more room for profits.

U.S. trade with Cuba, the change will take some time.

In short, the market will begin to see the enormous opportunity of changes in any relationship between the United States and Cuba.

Imperial Tobacco

From the point of view of Imperial Tobacco, which is a zero sum game (for example, the loss of the Swedish Match is the acquisition of Habanos, the loss of 50% of the value of the Swedish Match is the acquisition of Imperial Tobacco) is estimated for the Imperial Tobacco earnings per share will increase by 20 pence.