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Reynolds American Subsidiary to Receive Payment Following Gallaher Joint-Venture Termination
Date:2/21/2008

WINSTON-SALEM, N.C., Feb. 21 /PRNewswire-FirstCall/ -- Reynolds American Inc. (NYSE: RAI) announced today that R.J. Reynolds Tobacco C.V. (RJRTCV), an indirect wholly owned subsidiary of RAI, will receive a payment of euro 265.0 million (approximately $387.6 million) from Gallaher Limited (Gallaher), a JT International (JTI) Group company, resulting from the termination of the joint-venture agreement between RJRTCV and a Gallaher affiliate.

In accordance with the terms of the joint venture, RJRTCV will receive 40 percent of that total, euro 106.0 million (approximately $155.0 million), on or before April 20, 2008. Gallaher will pay the remaining 60 percent of the valuation amount in six equal annual installments of euro 26.5 million (approximately $38.8 million), beginning in April 2009. The dollar values reflect a euros-to-dollars exchange rate of 1.4625, calculated on the morning of Feb. 20, 2008.

After accounting for the company's cost basis and discounting the stream of future payments, RAI expects the payment to result in a pre-tax gain of approximately $300 million, which will be recorded in the first quarter of 2008.

The valuation payment results from last year's termination of R.J. Reynolds-Gallaher International Sarl, a Swiss joint venture that was formed by RJRTCV and a Gallaher affiliate in 2002. The joint venture marketed American- blend cigarettes primarily in Italy, France and Spain.

On April 18, 2007, an affiliate of Japan Tobacco Inc. acquired Gallaher Group Plc, which constituted a change of control of Gallaher as defined by the joint-venture agreement. In accordance with the terms of the agreement, RJRTCV elected to terminate the joint venture prior to its expiration date. The joint venture was terminated on Dec. 31, 2007.

Under the joint-venture agreement, both companies licensed trademarks to the joint venture. Upon termination of the joint venture, the party whose licensed trademarks have the greater value is required to pay to the other party a mutually agreed payment that is calculated in accordance with the terms and principles set forth in the agreement.

ABOUT US

Reynolds American Inc. (NYSE: RAI) is the parent company of R.J. Reynolds Tobacco Company; Conwood Company, LLC; Santa Fe Natural Tobacco Company, Inc; and R.J. Reynolds Global Products, Inc.

-- R.J. Reynolds Tobacco Company, the second-largest U.S. tobacco company,

manufactures about one of every three cigarettes sold in the country.

The company's brands include five of the 10 best-selling U.S. brands:

Camel, Kool, Pall Mall, Winston and Doral.

-- Conwood Company, LLC is the nation's second-largest manufacturer of

smokeless tobacco products. Its leading brands are Kodiak, Grizzly and

Levi Garrett. Conwood also sells and distributes a variety of tobacco

products manufactured by Lane, Limited, including Winchester and

Captain Black little cigars, and Bugler roll-your-own tobacco.

-- Santa Fe Natural Tobacco Company, Inc. manufactures Natural American

Spirit cigarettes and other additive-free tobacco products.

-- R.J. Reynolds Global Products, Inc. manufactures, sells and/or

distributes American-blend cigarettes, including Natural American

Spirit, and other tobacco products to a variety of customers worldwide.

Copies of RAI's news releases, annual reports, SEC filings and other financial materials are available at http://www.ReynoldsAmerican.com.


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SOURCE Reynolds American Inc.
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