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Posted

After many denials, merger talks involving Altadis S.A. are on!

Los Angeles, March 16 – After more than a year of rumours, whispers and denials, Imperial Tobacco made an unsolicited offer to purchase Altadis S.A. for 45 Euro (almost $60) per share.

According to Altadis’s statement, “Yesterday, March 14th, 2007 at 20:00 hours, the competing British company Imperial Tobacco Group PLC approached Altadis in a non solicited nor negotiated way regarding a possible combination between both groups that could result, or not, in the launch of a public tender offer in cash for 100% of the share capital of Altadis, at an indicative price of 45 euros per share . . .”

These are large companies, ranked fourth (Imperial) and fifth (Altadis) in the world among the tobacco giants and Imperial may itself be running from a potential takeover effort from Altria (Philip Morris U.S.A./Philip Morris International) or even the investment firm Kohlberg, Kravis, Roberts & Co.:

• Imperial had sales of about $22.6 billion U.S. (converted from British pounds) and pre-tax profits of about $22.6 billion (converted) in 2006.

• Altadis had sales of about $16.6 billion (converted from Euro) last year and pre-tax profits of about $1.53 billion (converted).

Imperial’s business is concentrated in cigarettes while Altadis sells 119 billion cigarettes a year, but is also the world’s largest cigar company and has an impressive logistics network for tobacco distribution.

The offer of 45 euro per share, or a total of about $15.28 billion U.S. mirrors the 12.5-times-projected 2007-earnings purchase price of Britain’s Gallaher Group by Japan Tobacco which was initiated last December.

Analysts have been in favour of an Imperial-Altadis hook-up for some time, since their market shares generally complement each other: Imperial with strength in Britain and Germany while Altadis’s main markets are in Spain and France with both companies starting to see gains in Eastern Europe.

The proposed merger would create the second-largest tobacco entity in Europe behind only British American Tobacco (BAT) and caused additional speculation that perhaps Altria might now bid for Imperial as the company is in play.

The process from here is for a period of research by the Altadis board of about three weeks to investigate the offer, a meeting of the Altadis board to recommend the offer, arrangement of the financing and approval of the transaction. Altadis’s statement indicated that its acceptance would require approval from 80% of its shares. The company is estimated to be half-owned by British and American investors, with 20% by institutional investors in France and Spain and two percent by the employees.

While an offer is possible and makes sense from a cigarette perspective, what about cigars? Imperial has no cigar portfolio to speak of while Altadis is not only the worldwide leader in cigars, it owns half of the Cuban cigar distribution company Habanos S.A. and is working to introduce a high-end Montecristo-branded cigarette. Will the cigar portion of Altadis be spun off, be purchased by someone else, left alone or split apart for its break-up value? No one knows . . . yet.

From Cigar Cyclopedia.com

Posted

Is this statement correct?

• Imperial had sales of about $22.6 billion U.S. (converted from British pounds) and pre-tax profits of about $22.6 billion (converted) in 2006.

Do they not have any expenses?

Posted

» Is this statement correct?

»

» • Imperial had sales of about $22.6 billion U.S. (converted from

» British pounds) and pre-tax profits of about $22.6 billion (converted) in

» 2006.

»

» Do they not have any expenses?

The accountant in me just came out and I thought the same thing. Must be nice to not book expenses. If that is the case I think I will give myself a raise to by more cigars.

Posted

» I was reading about this earlier today, but it almost sounded like a

» hostile bid, and

» not a merger per se. We'll see what happens.

Greetings. To be exact, this is an "unsolicited approach" . One of the conditions, if the takeover is to go ahead, is that the board of Altadis must agree to it.

Therefore, there will be no "hostile" bid and, if the takeover goes ahead, it will be amicable.

Since Imperial is not in the Cuban cigar business (correct me if I'm wrong) it might be safe to assume that the Altadis part of the enlarged group will continue to run this profitable part of the business. Best regards.

Joe

Posted

» The latest I've read is that Altadis has rejected Imperial's bid - and that

» a hostile

» bid might be a possibility.

Altadis owns 50% of Habanos s.a

As far as I have been aware, the 50% Cuban entity of Habanos s.a. needs to approve any change in Altadis ownership.

Posted

This is huge news.

Does anyone here care to analyse the impact on Cubans if this deal / takeover / goes ahead? Rob, from your former life, whats your view?

And how will this impact on post embargo events?

Posted

» This is huge news.

»

» Does anyone here care to analyse the impact on Cubans if this deal /

» takeover / goes ahead? Rob, from your former life, whats your view?

»

» And how will this impact on post embargo events?

From what I know (which is not much), Imperial need to grow big quickly to avoid being swallowed up themselves. There is plenty of private equity money around driving these mergers.

The Habanos sa acquisition makes sense. They get the bulk they need and a profitable operation which is well managed and which they can leave alone.

However, if the debt level required for the takeover is too high, then they will want a stronger yield from their Habanos sa involvement. That I would not like as it would put pressure on pricing, new lines etc etc.

There are certainly worse fits out there.

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