ST SELLS ITS CIGARETTE BUSINESS, BUT KEEPS CIGARS AND SMOKING TOBACCO

Scandinavian Tobacco Group (ST) is to sell its cigarette activities and certain roll your own and snus activities to British American Tobacco (BAT). Scandinavian Holding (SH), owning approx. 65% of ST, has entered into an agreement with BAT to the effect that BAT is to acquire the ST companies House of Prince, J.L. Tiedemanns Tobaksfabrik and Fiedler & Lundgren, including Orlik Tobacco Company’s (OTC’s) 50% share of Fiedler & Lundgren.

At the same time, it has been agreed that SH is to acquire BAT’s share-holding of approx. 32% in the remaining ST Group. Following an anticipated redemption of the employee shares, the ST Group will be wholly owned by SH.

The parties have assessed the value of the total ST Group at approx. EUR 3.7 billion (DKK 27.5 billion), of which approx. EUR 2.7 billion (DKK 20 billion) constitutes the value of the three companies to be transferred to BAT.

The Chairman of SH and ST, Jørgen Tandrup, states the reasons for the sale of the three companies as the need to ensure their long-term development:

”During recent years, the international markets for cigarettes and RYO products have been significantly consolidated. Obviously, as a regional player, ST experiences this as considerable pressure on the business. ST’s cigarette and RYO businesses are of such a size and character that we cannot grow through acquisitions of companies, but only by acquiring market shares from our competitors."

"To a high extent, ST’s cigarette business has succeeded in this and has by virtue of House of Prince had very fine growth during recent years. However, unfortunately not enough to ensure the company’s development in the long run, because the cigarette and RYO markets in Western Europe, where ST is based, experience an overall decline. By selling now, we ensure the companies a strong position in a large, international company. At the same time, SH’s shareholders have obtained a satisfactory price”.

The snus company, Fiedler & Lundgren, is primarily included in the sale because sales of the company’s products, which are sold in Norway and Sweden, take place via the companies now to be acquired by BAT.

Subject to the implementation of the transaction, two further agreements have been signed: Firstly, ST has entered into an agreement with Assens Tobaksfabrik (AT) to acquire AT’s 50% share in OTC so that subsequently, OTC will be wholly owned by the ST Group. Secondly, SH’s present three shareholders have entered into an agreement to the effect that Aktieselskabet R. Færchs Fabrikker discontinues as a shareholder in SH which will subsequently be owned by Chr. Augustinus Fabrikker and C.W. Obel.

All agreements related to the implementation of the transactions are subject to the approval by the competition authorities expected to take place in three or six months.

Chr. Augustinus Fabrikker and C.W. Obel, two Danish tobacco dynasties dating back to the 1750s, attach great importance to continuing in the tobacco industry, underlines Jørgen Tandrup, SH’s and ST’s Chairman:

“For Augustinus and Obel, it is of the utmost importance that with SH’s acquisition of BAT’s minority shareholding in ST and the acquisition of AT’s share in OTC, SH cements its commitment to tobacco”.

The ST Group continues to be a world leading manufacturer of cigars and pipe tobacco, and a major player within RYO.

The international activities within smoking tobacco and cigars will be continued after a merger of the remaining tobacco activities in OTC, ST Cigar Group and ST Sales. The ST Group’s ownership of the convenience goods company Dagrofa and the considerable shareholding in Tivoli will not be affected.

The Management Board of the future ST Group will consist of Anders Colding Friis, CEO, Christian Hother Sørensen, Executive Vice President, and Rob Zwarts, Executive Vice President.

“Though it is obviously sad that the ST Group is now split up, I am pleased that House of Prince, J.L. Tiedemanns Tobaksfabrik and Fiedler & Lundgren are to become part of a large and professional owner with tobacco trade knowledge who only wishes to continue to develop the companies and their employees”, says ST’s CEO, Anders Colding Friis, while underlining that the remaining part of the ST Group continues to be a major and strong international company with a turnover of approx. EUR 3 billion (DKK 22 billion) and 9,500 employees. “Earnings are considerable, and the potential is great especially on the large, global cigar market,” says Anders Colding Friis.

At the press conference at 11.00 hrs., Jørgen Tandrup, Chairman of SH and ST, and Anders Colding Friis, CEO of ST, will participate.

Enquiries:

Scandinavian Tobacco Company

Jørgen Tandrup, Chairman of SH and ST

Anders Colding Friis, CEO of ST

Phone: +45 39 55 62 00

British American Tobacco

Press Office

David Betteridge / Kate Matrunola / Cat Armstrong

+ (44) 207 845 2888 (24 hours)

Investor Relations

Ralph Edmondson / Sharon Woodcock

+ (44) 207 845 1180 / 1519

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FACT SHEET:

Subject to the approval by the competition authorities, Scandinavian Holding (SH) has entered into an agreement with BAT partly on BAT’s acquisition of the ST Group’s cigarette activities, the Roll Your Own activities in Norway and the snus activities in Fiedler & Lundgren, i.e. of House of Prince (HoP), J.L. Tiedemanns Tobaksfabrik (JLT) and Fiedler & Lundgren (F&L), partly on SH’s acquisition of BAT’s minority shareholding of approx. 32% in the remaining ST Group.

The parties have assessed the value of the total ST Group at approx. EUR 3.7 billion or approx. DKK 27.5 billion, of which EUR 2.7 billion, or approx. DKK 20 billion, is the value of HoP, JLT and F&L.

The consolidation of the industry was anticipated. That the consolidation takes place now is partly due to the fact that the three companies will be able to obtain a strong position in the pending BAT integration, and partly to the fact that with the agreement with BAT, SH has obtained a satisfactory price for SH’s shareholders.

At the same time, the transaction with BAT means that SH is to acquire BAT’s shareholding in the remaining ST Group, whereby SH will own approx. 97% of the share capital in ST. The remaining approx. 3% of the shares are owned by employees and are planned to be redeemed during 2008 on the basis of the value of the ST Group on which SH and BAT based their transaction, i.e. approx. DKK 27.5 billion. Once the redemption has been implemented, ST will be wholly owned by SH.

ST is to acquire AT’s 50% share of OTC, so that subsequently OTC will be a wholly owned ST subsidiary.

SH’s existing shareholders have made an agreement to the effect that Færch discontinues as a shareholder in SH.

The changed shareholding structure in SH as well as in OTC will be notified to the competition authorities.

The ST Group is a world leading manufacturer of cigars and pipe tobacco.

The tobacco activities of the future ST Group will consist of the wholly owned companies STCG, OTC and ST Sales and will be restructured as a function orientated group, i.e. the cigar and smoking tobacco activities will be united in functions such as finance, operations, sales/marketing and staff functions.

Last year, the companies in the remaining ST Group had a turnover of approx. EUR 3 billion (DKK 22 billion) and 9,500 employees, of which 7,400 in Denmark.

The three companies sold off employ a total of approx. 2,100 people, of which 730 in Denmark.

During the last financial year, the three companies’ turnover was EUR 0.72 billion (DKK 5.4 billion).

BAT is one of the world’s largest tobacco companies with total sales in Europe alone of 250 billion cigarettes, globally 689 billion cigarettes, to which can be added 31 billion cigarettes from ST in the future.