Imperial Tobacco Group May Be Close to Agreement to Buy Altadis

Source from:  By Thomas Mulier July 18 (Bloomberg) 07/18/2007

Imperial Tobacco Group Plc, Europe's second-biggest cigarette maker, may be close to buying Altadis SA after raising its bid for a second time. Imperial agreed to pay 12.8 billion euros ($18 billion) for Madrid-based Altadis, the Financial Times reported yesterday. The 50-euro-a-share price matches a competing bid by CVC Capital Partners Ltd. The Spanish company had turned down previous bids from Imperial valued at 45 euros and 47 euros a share. Buying Altadis will add Gauloises cigarettes to Bristol, England-based Imperial's Davidoff brand, bolstering the company's position as the world's fourth-largest publicly traded tobacco company. Cigarette makers in western Europe are buying rivals to reduce costs by closing factories as smoking bans cut consumption in the region. "Imperial's the natural buyer for them," said Matthew Kaufler, who helps manage $2.7 billion, including 231,401 Altria Group Inc. shares, at Clover Capital Management Inc. in Rochester, New York. "They'll be able to achieve much more in the way of cost synergies than a private-equity firm." London-based CVC, Europe's second-largest leveraged-buyout firm, bid for Altadis on its own after PAI Partners dropped out of a planned joint offer worth 12.8 billion euros. CVC's investments include Spanish cosmetics maker Colomer Group, whose chairman sits on the board of Altadis, the world's biggest cigar company. Imperial spokesman Alex Parsons didn't return calls seeking comment. Altadis spokesman Miguel Angel Martin and spokeswoman Anne-Marie Lassalle didn't answer e-mail requests for comment. More Takeovers Shares of Altadis, whose cigar brands include Montecristo and Don Diego, rose 20 cents to 48.1 euros yesterday in Madrid. Stock in Imperial, the maker of Golden Virginia loose tobacco and Rizla rolling papers, gained 1 penny to 2,201 pence in London. Industry takeover activity has intensified since Japan Tobacco Inc. agreed in December to pay 7.5 billion pounds for Gallaher Group Plc. Imperial's agreement with Altadis comes three months after it closed the $1.9 billion purchase of Commonwealth Brands, which expanded the U.K. company into the U.S. market. Imperial's main British and German markets are shrinking, adding to the allure of Altadis, which gets most of its sales from Spain and France. The Spanish company owns the largest distributors of tobacco in its domestic market, Italy and Morocco. "Unlike many industries, the consolidation in the tobacco industry has largely worked," Peter Langerman, chief executive officer of Mutual Series Fund Group, one of Altadis's main investors, said earlier this year. Altadis was formed in 1999 as the former French and Spanish monopolies merged. Tabacalera, the former Spanish company, has roots extending to 1636, while France's Seita was created by Napoleon Bonaparte in 1810, according to Hoover's Inc. To contact the reporter on this story: Thomas Mulier in Madrid at tmulier@bloomberg.net . Enditem