UPDATE 1-Imperial Tobacco shares rise on Altria bid talk
(Updates with closing share prices)
By David Jones
LONDON, March 16 (Reuters) - Shares in Britain's Imperial Tobacco (IMT.L) rose strongly on Friday after its bid for Franco-Spanish rival Altadis sparked talk U.S. tobacco giant Altria (MO.N) could launch its own bid for the UK company.
Imperial is the only big international business that the world's biggest tobacco group Marlboro-maker Altria could buy for anti-trust reasons, and if Imperial succeeded in taking over Altadis ALT.MC this opportunity will disappear, analysts said.
"Altadis should be the final poison pill raising anti-trust barriers beyond reasonable levels for Altria," said analyst Charles Manso de Zuniga at Dresdner Kleinwort.
Altadis has large market shares in its home markets of France and Spain and so would be virtually impossible for Altria to take over because it also has big shares in these countries.
Imperial shares ended up 4.9 percent at 23.30 pounds to be the FTSE 100 Index's biggest gainer after an 8.6 percent rise on Thursday. Altadis shares closed off 3.6 percent at 43.75 euros.
After Altria's Kraft spin-off in the next few weeks, it will have a market value of over $130 billion and be virtually debt-free and could afford to pay up to 25 pounds a share for Imperial, or 16.9 billion pounds, say analysts.
"An Altria deal is not likely, but it has to be considered and it makes Imperial vulnerable," another analyst said.
Altria would have to sell off businesses in Britain and Germany to get around competition concerns, and this may dilute the attractiveness of a deal, analysts said.
Altria declined comment on Imperial.
Imperial set the ball rolling on what analysts see as the last big current sector deal with a bid for the Gauloises maker Altadis at 45 euros a share, or 11.5 billion euros, but they say Imperial could pay up to 50 euros, or 12.8 billion euros, and still make a deal work financially.
"We estimate Imperial could bid 50 euros for Altadis and deliver double-digit year two earnings enhancement," said de Zuniga at Dresdner Kleinwort.
Jonathan Fell at Deutsche Bank was more cautious, saying "Imperial may not be able to pay over 48 euros".
Others added the success of Imperial's bid will rest on how much pressure Altadis shareholders can put on management to come to the table and consider the offer, and the signs are that some investors are favourable to Imperial's long-awaited approach.
Meanwhile, analysts say there is unlikely to be a rival bid for Altadis as of the top three players, Altria would have anti-trust problems, British American Tobacco (BATS.L) considers potential targets overvalued, while Japan Tobacco is digesting its 7.5 billion pounds purchase of Gallaher Group Plc GLH.L.
Imperial, which makes Lambert & Butler and Embassy in Britain and West and Davidoff in Germany, made a bid approach late Wednesday to Altadis at 45 euros a share, but the Madrid-based group said it was unsolicited and will discuss it at a board meeting in the next few days.
A combination of Imperial and Altadis would bring together the fourth and fifth largest tobacco groups in the world, but still leave it behind Altria, BAT and Japan Tobacco.
Signs of Altadis shareholder pressure on the Madrid group came Thursday with U.S. fund management firm Franklin Mutual Adviser, which holds 8 percent of the stock, saying it was supportive of a transaction combining Imperial and Altadis. Analysts point out that since talk of an Imperial-Altadis deal emerged 27 months ago, Altadis' share register has a higher proportion of hedge funds and these short-term holders of stock will be more predisposed to a deal.
Analysts expect Imperial to fund an Altadis deal using 60 percent debt and 40 percent equity, implying a rights issue of up to 3.5 billion pounds, while the deal should extract some 250 million euros of annual cost savings, estimates Deutsche Bank.
($1=.7505 Euro)
((Editing by David Cowell/Rory Channing; Reuters Messaging: david.jones.reuters.com@reuters.net; +44 20 7542 7972)) Keywords: ALTADIS IMPERIAL/
(C) Reuters 2007. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nL1674357
- Tweet this
- Link this
- Share this
- Digg this
- Reprints
Follow Reuters