Imperial Strikes at Altadis in Pounds 7.9bn Bid

By TAMSIN BROWN

IMPERIAL Tobacco fired up the sector after making its long awaited move on the Franco-Spanish maker of Gauloise cigarettes, Altadis.

The owner of Rizla rolling paper and Lambert Butler cigarettes approached Altadis on Wednesday evening with its Pounds 7.9bn takeover deal.

Discussions are at a ‘very early stage’ and the board of Altadis are to meet within the next few days to discuss the approach.

A tie-up between Imps and Altadis follows hot on the heels of Japan Tobacco’s Pounds 7.5bn acquisition of Gallaher and would create a Pounds 23bn group.

Its packet of brands would include Fortuna and Embassy cigarettes, as well as Montecristo cigars and Drum tobacco.

The pair make a good geographical fit – Imperial is big in the UK and Germany, while Altadis has a strong position in France and Spain. Both operate in mature markets and together they would be able to save money by cutting costs.

Altadis shares surged above the indicative offer price, suggesting Imperial might have to dig deeper to land its prey.

At the same time, Imps shares jumped 175p to 2222p, as the market gave the thumbs-up to the potential deal and amid speculation the Marlboro man could spoil the party. Market leader Altria – owner of Philip Morris – might find it difficult to resist getting involved and could wade in with a bid for Imperial.

One analyst said: ‘This move is almost forcing the end game.

Imperial Tobacco is throwing its cards on the table. Will the biggest player want to do nothing when all this is going on around it?’ Analysts believe Altria would have to team up with a junior bidding partner, such as Altadis if it were try to go for Imperial Tobacco.

It could then sell off businesses that posed competition issues to the Spanish.

There was also talk that British American Tobacco (up 42p at 1562p) could pile in with a counter offer for Altadis, although it recently signalled acquisitions were looking to dear.

While the timing of Imperial’s move took the market by surprise, coming just over a month after its announced it was spending nearly Pounds 1bn on Commonwealth Brands.

A DECADE OF TOBACCO DEALS

1997 Imperial buys Rizla for Pounds 185m

1999 BAT pays Pounds 5bn for Rothmans

2002 Imps nabs Germany’s Reemtsma for Pounds 3.6bn

2004 RJ Reynolds merges with US arm of BAT

2007 Japan Tobacco buys Gallaher for Pounds 7.5bn

2007 Imperial nets Commonwealth Brands for Pounds 974m

2007 Imperial swoops on Altadis

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