Imperial Tobacco's Full-Year Performance in Line with Expectations

Source from:  By Michael Carolan Sep 19, 2007 LONDON (MarketWatch) 09/20/2007

Imperial Tobacco Group PLC (ITY:imperial tobacco group plc sponsored adr News, chart, profile, more Last: 88.44-0.81-0.91% 8:13pm 09/19/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: ITY88.44, -0.81, -0.9%) said Wednesday that its full-year performance remains in line with its expectations, and approval for its Altadis SA (ALT.MC) bid is expected from Spanish regulators in the next few weeks. The Bristol, southwest England-based tobacco group which is in the process of buying Franco-Spanish rival Altadis SA (ALT.MC) for EUR12.6 billion said it has continued to grow its cigarette volumes and margin in the second half of the year to Sept. 30 with strong performances from its key brands Davidoff, West and JPS. The company said it has already received US antitrust clearance for its Altadis bid and has filed an application for clearance with the E.U. Commission. "We await approval of our offer document from the CNMV, the Spanish regulator, which is expected in the next few weeks." The Altadis board said on July 18 that it would recommended Imperial's EUR50-a-share bid "in the absence of a competing offer at a higher price." The acceptance period will commence after approval is received, the company said. Imperial has said previously that it expects the deal to complete in November. Imperial's rival suitor - private equity group CVC Capital - has yet to respond to the agreed bid. The poor state of debt markets mean that it could struggle to raise sufficient financing. Still, the slow regulatory procedure in Spain means that CVC can probably wait until November - when the outlook for global markets may be clearer - before making its move. The company said in its trading update that its market share grew in its home U.K. market, while profit benefited from pricing improvements and cost savings. The bans on smoking in enclosed public places, introduced throughout the U.K. over the last 18 months have resulted in an initial decline in cigarette market volumes, the company said. "We expect this impact to diminish over time, reflecting the trends we have seen in other markets with similar legislation," it said. In Germany, cigarette market share grew, though the tobacco market continued to decline due to cross-border flows. Market share continued to grow in most other Western European countries, it said, while profit benefited from improved pricing. "Our overall results have been affected by declining travel retail market volumes partly compensated for in our U.K. performance," it said. The contribution from Commonwealth Brands, the U.S. business it bought in February was in line with expectations and helped to improve group operating margin, it said. In the Rest of the World region, the company gained share in most key markets. "We continue to seek opportunities to expand our geographic footprint," it said. The battle for Altadis - whose brands include Gitanes and Gauloises cigarettes as well as Montecristo cigars - marks perhaps the last big deal in a series of acquisitions consolidating the industry in Europe. As cigarette sales slowly decline due to smokers in major Western European markets kicking the habit and younger generations avoiding the products, multinational cigarette makers have been buying one another to cut costs through economies of scale. The deal will consolidate Imperial's position as the world's fourth largest tobacco company. It will also mean Imperial leapfrogs British American Tobacco PLC (BTI:british amern tob plc sponsored adr News, chart, profile, more Last: 67.74-0.86-1.25% 8:06pm 09/19/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: BTI67.74, -0.86, -1.3%) and Japan Tobacco (2914.TO) to become Europe's second largest player behind Altria (MO:altria group inc com News, chart, profile, more Last: 68.73+0.67+0.98% 8:15pm 09/19/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: MO68.73, +0.67, +1.0%) . Altadis had previously rejected two lower bids from Imperial - at EUR45 and EUR47-a-share - as too low. Imperial's shares have drifted down slightly since August on concern that the troubled debt markets may force the company to up the size of the rights issue which is partly funding the deal to more than GBP5 billion. Citi, the Royal Bank Of Scotland, Lehman Brothers, Barclays and Santander Central Hispano arranged and underwrote GBP9.2 billion of loan facilities to help fund the Altadis deal, while ABN Amro Hoare Govett, Morgan Stanley, Citi and Lehman Brothers arranged and underwrote a GBP5.4 billion equity bridge facility because the proceeds of the rights issue won't be available on completion of the acquisition. The GBP5 billion rights issue will be underwritten by ABN Amro Hoare Govett, Morgan Stanley, Citi and Lehman Brothers. The latest round of tobacco consolidation began with Japan Tobacco's GBP7.5 billion recommended bid for Imperial's U.K. rival Gallaher PLC in December 2006. The company is due to release its full-year results on Oct. 30. Company Web site: www.imperial-tobacco.com Enditem