Imperial Tobacco's Acquisiton of Altadis Expected to Complete in January

Source from:  By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones) 10/31/2007

Imperial Tobacco Group PLC (ITY:imperial tobacco group plc sponsored adr News, chart, profile, more Last: 100.91-0.15-0.15% 3:59pm 10/30/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 100.91, -0.15, -0.1%) Tuesday posted a 6% rise in full-year pretax profit, but said its acquisition of Franco-Spanish rival Altadis SA (ALT.MC) would not now complete until January 2008, some two months later than originally expected. The Bristol, southwest England-based tobacco group, which is buying Altadis for EUR12.6 billion, said that in the 12 months to Sept 30, pretax profit was GBP1.24 billion, up from GBP1.17 billion a year earlier. Net sales - which exclude duty paid on cigarettes - grew 4% to GBP3.28 billion from GBP3.16 billion a year ago. While the results were in line with expectations, the delay in the Altadis acquisition disappointed the market and by 0948 GMT, the shares were down 30 pence, or 1.2%, at 2413 pence in a lower London market. The shares have risen more than 30% in the last year. The company said its expects approval soon from the Spanish regulator, and sees the deal now completing in January 2008. It had originally expected completion in November 2007. Evolution Securities analyst Andrew Darke described the delay in the Altadis deal as "a little disappointing," but said he remains confident it will go ahead. Chief Executive Gareth Davis said, on a conference call to reporters, that the delay was largely due to a change to Spanish takeover procedures in August. It was frustrating, he said, but added, "it's just a matter of time ... it's pretty imminent." Once regulatory approval is received, Altadis will hold a meeting of shareholders to approve the deal, which has already received antitrust clearance from the U.S. and European Union, with the stipulation that a few small disposals must be made in Europe. The Altadis board said on July 18 that it would recommend Imperial's EUR50-a-share bid "in the absence of a competing offer at a higher price." CEO Davis was confident there would be no other bidders to spoil the deal for Imperial. "You never say never - but I think its unlikely," he said. Imperial's rival suitor earlier in the year - private equity group CVC Capital - failed to respond to the agreed bid after struggling to agree financing amid troubled debt markets. The chances of a rival bid appear to be waning. 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: 74.40-1.20-1.59% 4:00pm 10/30/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 74.40, -1.20, -1.6%) and Japan Tobacco (2914.TO) to become Europe's second largest player behind Altria (MO:altria group inc com News, chart, profile, more Last: 72.76-0.21-0.29% 4:00pm 10/30/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 72.76, -0.21, -0.3%) . "The enlarged group presents considerable opportunities going forward and following completion we will be focused on rapidly realizing these through the swift integration of the two businesses," said CEO Davis in a statement. "We remain well placed to continue to create significant value for our shareholders." Davis said neither the delay, nor the recent disruption to the global financial markets from the U.S. sub-prime lending woes, would affect on the company's funding for the deal. Citi, Royal Bank Of Scotland Group PLC (RBS.LN), Lehman Brothers, Barclays PLC (BCS:Barclays PLC News, chart, profile, more Last: 49.34+0.10+0.20% 4:00pm 10/30/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 49.34, +0.10, +0.2%) 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. A GBP5 billion rights issue will be underwritten by ABN Amro Hoare Govett, Morgan Stanley (MS:morgan stanley com new News, chart, profile, more Last: 65.49-0.78-1.18% 4:01pm 10/30/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: 65.49, -0.78, -1.2%) , Citi and Lehman Brothers. The company said Tuesday that the rights issue, which is part-financing the acquisition, will occur before July 18, 2008. Imperial said that over the year, its volumes grew by 7%. Evolution's Darke said the company's full-year performance was in line with his forecasts, with no major financial surprises. He said that a slightly weaker-than-expected performance in Germany was offset by a strong performance of Commonwealth Brands. It shows the company has "lost none of its acquisition skills," said Darke. In Germany, revenue fell to GBP524 million from GBP575 million, with profit down to GBP238 million from GBP270 million on a year ago. CEO Davis said the German market was now over the worst of its problems, after a dislocation in the market caused by large tax rises and the end of the market for make-your-own "singles" cigarettes. "It's still a challenging market," he said, "but we see the profit outlook improving over time." U.K. sales rose to GBP876 million from GBP835 million, with profit up to GBP564 million from GBP506 million. This growth reflected market share gains, cost savings and price rises, the company said. CEO Davis said that the bans on smoking in enclosed public places, introduced throughout the U.K. over the last 18 months, had reduced U.K. volumes by 4% - "pretty much as anticipated." Over the first year of the ban, this would recover to a decline of 2%, he 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 tobacco industry in Europe. CEO Davis said that there are still consolidation opportunities out there, though these are more likely to be smaller bolt-on acquisitions rather than transformational deals. The privatization of the Turkish state tobacco company Tekel is likely to be the next deal in the sector, with final bids expected by the end of January, he said. 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. Company Web site: http://www.imperial-tobacco.com -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com Corrected Oct. 30, 2007 6:19 ET (1019 GMT) (END) Dow Jones Newswires October 30, 2007 05:55 ET (09:55 GMT) Enditem