Imperial Tobacco, the UK cigarette maker, on Thursday made an €11.5bn takeover approach for Spanish rival Altadis.

The conditional cash offer of €45 a share is at an 18 per cent premium to the price at which Altadis shares were suspended earlier on Thursday, and excludes a 50 euro cents dividend to be paid to Altadis shareholders next week.

However, Imperial Tobacco, which last month made its first move into the US market after paying $1.9bn for Commonwealth Brands, said the talks with the Madrid-based group were at a “very early stage”.

Altadis, which makes the Gauloises and Fortuna cigarettes, said its board will meet in the next few days to consider the unsolicited approach.

Shares in the Franco-Spanish group, which had earlier been suspended pending confirmation of the approach, resumed trading above the offer price. The shares jumped 18.7 per cent to €46.16, valuing the group at about €11.82bn.

Shares in Imperial Tobacco, which have been buoyed in recent days by takeover speculation, jumped 129p or 6.3 per cent to £21.76.

Company profiles
Imperial TobaccoAltadis
Market cap£14.9bn ($28.8bn)€11.8bn ($15.7bn)
Pre-tax profits 2006£1.17bn ($2.2bn)€840m ($1.1bn)
Revenue£11.68bn ($22.6bn€12.4bn ($16.9bn)
BrandsDavidoff, West, Drum, Rizla, Golden VirginiaFortuna, Gauloises Blond, Colt, Royale, Habanos, Amsterdamer,
Chief executive

Gareth Davis

Antonio Vazaquez


There has been a series of tobacco deals in recent months as the sector consolidates in the face of falling sales in mature western markets. Earlier this year Japan Tobacco paid £7.5bn for Gallaher of the UK.

Should the bid from Imperial succeed it would create the fourth largest tobacco group in the world valued at £22bn.

Altadis has been the focus of bid speculation for years, but always insisted it would be a protagonist rather than a target.

Its defence strategy has consisted mainly of buying small manufacturers and distributors in developing countries, such as Balkan Star of Russia, while reducing its cost base through plant closures and job cuts.

In 2005 the company also ditched its awkward two-chairmen executive structure, a hangover from it creation in 1999 through the merger of Seita of France and Spain’s Tabacalera. Antonio Vázquez, head of the cigarette division, became the chief executive as Madrid was consolidated as the power centre of the Franco-Spanish group.

The development of its US-based cigar business, too, was supposed to cushion Altadis against the impact of declining cigarette sales in its main European markets.

However tough new anti-smoking legislations in Spain, coupled with a higher state tax take, cigarette price war and changing consumer habits last year hit Altadis harder than expected.

It last month unveiled a 21.5 per cent year-on-year decline in net profits for 2006, as cigarette sales fell more than 12 per cent, to 118.6bn units, and cigar sales, by nearly 5 per cent to 3.3bn.

Imperial Tobacco has long been rumoured to be stalking Altadis. According to a person familiar with current negotiations, the two companies have been in informal talks “for the past few months”. Analysts, however, have not completely ruled out a counter-offer, or speculative stake-building by Spanish investors.

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