A potential takeover of Imperial Tobacco by its rival British American Tobacco is looking more likely, according to Bonnie Herzog, a Wells Fargo analyst that follows the tobacco trade.
Following media speculation that BAT is mulling a takeover bit for Imperial Tobacco, Herzog said in a note: "Based on our in-depth market share and leverage analyses, we believe a deal is very probable and the most likely scenario is that BAT acquires IMT but spins off its U.S. assets, ITG Brands, in a tax-free spin to shareholders and divests some of the companies' brands in certain markets given antitrust concerns."
Should a deal take place, Herzog suggests, it would likely lead to brand divestures in several markets, due to competition issues.
"From an antitrust perspective, we see risk to possibly 22 markets, maybe more, should a deal transpire (see page 4 for a detailed analysis)," she said.
"They include 4 European markets (the U.K., Germany, France, and Spain) that are among IMT's top 10 markets by cigarette volume. These 22 markets represent more than 35% of IMT's global retail cigarette volume and more than 25% of BAT's, based on data from Euromonitor."
© 2015 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. To subscribe to ESM: The European Supermarket Magazine, click here.
