The Commerce Commission will not prevent Imperial Tobacco Group plc acquiring various tobacco brands and the Petone cigarette factory, but will continue to investigate the British American Tobacco (BAT)/Rothmans merger.

Commission Acting Chairman Mark Berry said that the Commission is concerned that the merged BAT/Rothmans might still be dominant in tobacco markets in New Zealand even after the proposed divestment to Imperial.

"Our view is that it appears that BAT and Rothmans are not divesting enough assets to prevent dominance," Mr Berry said. "We are not concerned that Imperial is entering the New Zealand market by acquiring assets from BAT and Rothmans and we will not take action against Imperial's proposed acquisitions."

Mr Berry said that BAT, its subsidiary WD & HO Wills (New Zealand) Limited, and the three Rothmans companies involved have all signed a legally enforceable Deed, including undertakings that the:

? current New Zealand companies will continue to own their assets;

? assets will not be merged into the joint BAT/Rothmans; and

? companies will preserve the market positions of each asset.

The Deed does not prevent the sale of assets to Imperial or any other company independent of BAT or Rothmans.

The Deed will remain in force until either the Commission or a court has confirmed that the merged BAT/Rothmans would not be dominant in any market in New Zealand.

The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any markets in New Zealand. Courts can impose penalties of up to $5 million against a company and up to $500,000 against an individual. They can also impose a wide range of orders and injunctions, including orders for divestiture of assets or shares.

Public copies of the Deed are available from reception at the Commission's Wellington office, 7th floor Landcorp House, 101 Lambton Quay, and from the companies.

Media contact: Commerce Act Manager Geoff Thorn

Phone work (04) 498 0958

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its web site www.comcom.govt.nz