Imperial Tobacco agreed to buy Franco-Spanish rival Altadis today in a €16.2 billion deal, strengthening its position as the world's fourth-largest cigarette group.
Imperial's offer of €50 per share matches a proposed offer from private equity firm CVC Capital Partners. The move will join Imperial with the world's fifth-largest cigarette group Altadis and close the gap with the world's top three groups; Altria Inc., British American Tobacco and Japan Tobacco.
Imperial makes Lambert & Butler and Richmond cigarettes in Britain, and West and Davidoff in Germany, while Madrid-based Altadis makes Gauloises, Gitanes and Fortuna cigarettes and also Montecristo cigars.
Imperial's cash offer will give cost savings of around €300 million a year and be earnings enhancing in its the first full year. "Imperial Tobacco and Altadis are a great strategic fit, which will consolidate our position as the world's fourth largest international tobacco company," said Imperial chief executive Gareth Davis in a statement.
Imperial is the number one cigarette player in Britain, and number two in Germany after its Reemstma deal in 2002 while Altadis in number two in France and Spain, and number one in Morocco, and also the leading cigar maker in the world.
Altadis said its board would recommend the offer to shareholders unless it received a higher bid, and added since Imperial's initial approach in March, the Madrid-based group had paid dividends to its shareholders of €1.1 a share.
Imperial shares rose 1.6 per cent to £22.45 earlier while Altadis shares were suspended in early trade. "The price looks high, but Imperial have an excellent record of making takeovers work and this is an essential deal to stay in touch with bigger groups," said one industry analyst.
The Imperial deal comes after Japan Tobacco bought Britain's Gallaher in an agreed £7.5 billion deal earlier this year and is expected to be the last big deal for a while as regulatory concerns are likely to prevent another one, analysts said.