UK: Imperial Tobacco To Float Off Logista Distribution Unit

Source from:  Reuters 06/11/2014

Imperial Tobacco Group (IMT.L) is to list its European logistics business Logista on the Spanish stock market with a sale of shares to institutional investors, the British company said on Tuesday.

Imperial gained control of Logista, which distributes products for Imperial and other tobacco makers in southern Europe, when it acquired Franco-Spanish business Altadis.

Logista also works for companies in the broader consumer goods sector as well as telecom operators, pharmaceutical companies and publishing houses, distributing their goods to about 300,000 "delivery points" including shops, petrol stations, pharmacies and hospitals, hotels and restaurants.

Imperial, the world's fourth-largest international tobacco group, said on Tuesday Altadis aims to sell a tranche of shares in Logista through an offer to certain institutional investors but Imperial will retain a majority stake, which some analysts found surprising.

Imperial's shares were up 0.4 percent at 2614 pence by 1148 GMT.

"This means that ... the asset-heavy business will continue to weigh on returns on capital and profitability," said Morningstar analysts in a research note.

"We expect Imperial to reduce its stake over time," they added.

Logista, which Morningstar estimates could be valued in the share sale at about 1.1 billion pounds ($1.9 billion), generates a low single-digit operating margin, whereas the tobacco business generates a margin north of 40 percent even as its revenue is slipping due to increasing regulation and fewer people smoking.

What is more, being in control of store delivery has less competitive value in tobacco than it does for other products like soft drinks, Morningstar said, since in-store displays are often heavily regulated.

Imperial, whose brands include Davidoff and Gauloises cigarettes, Golden Virginia and Drum rolling tobacco and Cohiba Cuban cigars, had said in February it was considering listing shares in Logista. Enditem