Wednesday July 18, 05:47 PM
Imperial Tobacco strikes 16.2-billion-euro deal for Altadis
By Ben Perry
LONDON (AFP) - Britain's Imperial Tobacco (LSE: IMT.L - news) said Wednesday it was set to become Europe's second-largest tobacco group after Franco-Spanish rival Altadis (Madrid: ALT.MC - news) accepted its 16.2-billion-euro (22.4-billion-dollar) takeover offer.
A tie-up between the world's fourth and fifth-biggest tobacco groups would marry Imperial Tobacco brands Regal, Embassy and Davidoff with Altadis' Gauloises and Fortuna amid a wave of consolidation in the tobacco sector.
"I am pleased to announce that the Altadis board will recommend our proposed offer to its shareholders," Imperial Tobacco's chief executive Gareth Davis said in a statement.
"Imperial Tobacco and Altadis are a great strategic fit, which will consolidate our position as the world's fourth-largest international tobacco company," he added.
Later in a conference call, Davis said the deal would propel Imperial Tobacco to second position in Europe behind Altria Group (NYSE: MO - news) 's Philip Morris, and create a company making 312 billion cigarettes a year.
Imperial said the Altadis board of directors would recommend that shareholders approve the bid, worth 50 euros a share, in the absence of a higher, competing offer.
In May, Luxembourg-based private equity firm CVC said it could potentially bid 50 euros a share for Altadis, but the group has yet to make any offer.
Altadis had earlier this year spurned two overtures from Imperial Tobacco of 45 and 47 euros.
With anti-tobacco legislation starting to bite, the tobacco sector is in a process of consolidation as companies seek economies of scale.
In April, the world's third-largest tobacco group, Japan Tobacco (Berlin: JAT.BE - news) , completed the friendly takeover of the sixth-largest group, Britain's Gallaher (LSE: GLH.L - news) , in a deal worth 19 billion dollars.
In February, Imperial Tobacco agreed to buy US cigarette maker Commonwealth Brands for 974 million pounds.
The offer accepted by Altadis management on Wednesday amounts to a 32-percent premium on Altadis's closing price on March 12, just ahead of a surge in the share value that followed the first offer.
On Wednesday, Imperial's share price closed up 1.54 percent at 2,235 pence on London's FTSE 100 (news) index, which ended lower.
Altadis gained 0.83 percent to 48.50 euros on Madrid's IBEX 35 (Madrid: news) , which also finished down.
The two groups meanwhile hope to realise savings of about 300 million euros a year through the merger.
"This deal significantly enhances our operating platform and scale with an increased presence in profitable mature markets and improved emerging market opportunities," Davis said.
"We will have a leading position in Spain, complementing our existing leadership position in the UK, and will strengthen our cigarette presence in other profitable Western European markets including Germany, France and Italy.
"This will be supported by enhanced cigarette positions in a number of other markets such as Morocco, where we will be the number one player, Russia, Poland and Finland," Davis added.
Imperial said the headquarters of the enlarged group would be in Bristol, western England. The headquarters of the cigar division and logistics business would be in Madrid, while the combined company would maintain a substantial presence in Paris.
Following completion, Altadis chief executive Antonio Vazquez and its chairman Jean-Dominique Comolli would join the board of Imperial Tobacco.
Imperial Tobacco said it would review the shareholding of Logistica, the Spanish logistics company that is 59-percent owned by Altadis.
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