Scandinavian Tobacco Group (STG) has agreed to sell its BREAK and Moro fine-cut tobacco brands to Japan Tobacco Inc. (JT) in a deal valued at €176 million (£150m), as the Danish tobacco company sharpens its focus on higher-growth categories.
The transaction, announced on Tuesday, is subject to customary closing conditions, including antitrust approvals, and is expected to complete before the end of the year.
BREAK and Moro, which are primarily sold in Germany, accounted for around 4 per cent of STG's reported net sales and gross profit before special items in 2025. Fine-cut tobacco represented approximately 12 per cent of the group's reported net sales last year.
STG said the sale forms part of its Focus2030 strategy, allowing it to concentrate on categories offering stronger long-term value creation while strengthening its balance sheet.
Chief executive Niels Frederiksen said: “With the divestment of BREAK and Moro to JT, we are taking a clear step forward in the execution of our Focus2030 strategy.
“After careful consideration, we have concluded that the full potential of BREAK and Moro can be better realised under new ownership and we can sharpen our strategic focus on the categories where we see the strongest long-term value creation opportunities.”
He added that the proceeds would be used to reduce debt and lower the company's leverage ratio, increasing its financial flexibility and supporting shareholder value.
The agreement also includes a contract manufacturing arrangement under which STG will continue producing the brands for Japan Tobacco for up to three years after completion.
Following the transaction, the company said it will assess how best to optimise its manufacturing network and improve operational efficiency.
STG said the disposal is expected to be dilutive to earnings but will not affect its 2026 guidance for reported net sales growth or its EBIT margin before special items. However, free cash flow before acquisitions and divestments is expected to receive a positive boost at closing through the transfer of inventories to JT.
On completion of the deal, STG expects its leverage ratio to fall below its target level of 2.5 times.