Altadis Accepts Imperial Bid

Source from:  By JASON SINGER July 18, 2007 07/19/2007

Spanish cigarette-and-cigar maker Altadis SA has agreed to be acquired by Imperial Tobacco Group PLC of the United Kingdom for about €13 billion ($17.9 billion), according to people close to the matter. The deal is expected to be announced as early as today. The deal, if completed, would create a European tobacco company with leading market shares in the U.K., France, Spain, Germany and many Eastern European countries. An acquisition of Altadis would also give Imperial the world's largest cigar business by sales, a fast-growing niche of the tobacco industry that operates at much higher profit margins than cigarettes. Imperial has topped Luxembourg private-equity firm CVC Capital Partners Ltd., which has been pursuing a takeover of Altadis since May. Imperial, which makes Lambert & Butler and JPS cigarettes, had made two takeover proposals that were rejected by Altadis, the maker of Gauloise, Gitane and Ducados cigarettes. Altadis's board has agreed to recommend a sale to Imperial for €50 a share, the same price CVC initially said it could be willing to pay. CVC could come back with a higher rival offer. Spokesmen for all three companies either declined to comment or couldn't be reached for comment. The battle for Altadis marks perhaps the last big deal in a series of acquisitions consolidating the industry in Europe. As cigarette sales slowly decline and smokers in the major Western European markets kick the habit and younger generations avoid the products, multinational cigarette makers have been buying one another to cut costs through economies of scale. They have also been moving into emerging markets where there are fewer regulations and restrictions and a greater percentage of smokers in expanding populations. Altadis also has an attractive cigar business that is the world's largest by sales. The company has a 50% share of Habanos SA of Cuba, with the other half owned by the Cuban government. The cigar business, which has separate production, supply-chain, marketing and sales operations from the cigarette business, has big growth potential in Asia, Russia and the Middle East as those markets enjoy rapid economic expansion. The market for Cuban cigars is expected to mushroom in the U.S. should Fidel Castro die and a new government one day be recognized for normal-trade status with Washington. Enditem