Britain’s Imperial Tobacco has made a friendly takeover bid for the Franco-Spanish tobacco group, Altadis, valuing it at 16.2 billion euros including debt. Altadis said its board is recommending the deal to shareholders. Imperial’s latest offer of 50 euros per share in cash matches a rival bid from private equity firm CVC Capital Partners. It puts pressure on CVC to increase the amount it is offering or give up on the idea of owning Altadis.
A merger would strengthen Imperial’s position as the world’s fourth largest cigarette group as it joins with No 5 Altadis. Together they would have 8.9%of market share, behind Japan Tobacco (11.7%), British American Tobacco (19.3%) and Altria’s Philip Morris (28.2%). The two companies combined would be second in terms of sales in Europe and would produce 312 billion cigarettes a year.
Imperial believes it can make annual cost savings of around 300 million euros by combining its manufacturing operations with Altadis. Imperial’s Chief Executive Gareth Davis called the deal a great strategic fit, that creates value for shareholders and makes the company stronger and more diverse.
This is the latest consolidation in the industry; earlier this year Japan Tobacco bought Britain’s Gallaher for eleven billion euros. Analysts said the Imperial deal is likely to be the last big one for a while as competition regulators would probably block others.