Imperial Tobacco Gains on Speculation BAT Preparing a Bid

  • FT's Alphaville blog says BAT is arranging financing for offer
  • BAT may walk away given Imperial's share price, FT says

Imperial Tobacco Group Plc rose to a record in London on speculation that British American Tobacco Plc is arranging financing to make a bid for the the maker of Davidoff and Lambert & Butler cigarettes.

The stock rose as much as 5 percent to 3,665 pence in London, increasing Imperial’s market value to 35 billion pounds ($53.5 billion). While BAT is said to be raising funds, it hasn’t made an approach and it’s possible none will be made, the Financial Times’s Alphaville blog said Friday, citing people close to the matter it didn’t name. The blog said its report is based on “market chatter” and hasn’t been formally tested through “traditional journalistic channels.”

“Imperial are very strong in North Africa and the Middle East, and there would be potential growth opportunities for BAT,” Duncan Fox, an analyst at Bloomberg Intelligence, said by phone. “Imperial also have strong brands in loose tobacco.”

BAT may back off from a bid given recent gains in Imperial Tobacco’s share price, which now may be too high, the FT said, citing the people. The stock has risen about 26 percent this year. Imperial and BAT representatives didn’t immediately return messages seeking comment.

BAT shares fell 0.1 percent to 3,857.50 pence as of 9:54 a.m. in London.

A takeover of Imperial Tobacco would end almost two decades of independence for the cigarette maker, which was spun off by Hanson Plc in 1996 before embarking on a 17 billion-pound acquisition spree that transformed it into one of the world’s four main tobacco companies. The company contributed further to the industry’s consolidation last year, spending $7.1 billion on brands such as Kool and Blu e-cigarettes.

Before it's here, it's on the Bloomberg Terminal.