Gallaher Group shares rise 22 percent
LONDON – Shares in European tobacco companies jumped Thursday on speculation about a new round of industry consolidation after Gallaher Group PLC revealed that it had received a takeover approach.Gallaher, which owns the brands Benson & Hedges and Silk Cut, confirmed in a statement to the London Stock Exchange after the market closed Wednesday that it had received a preliminary approach, but did not identify the suitor.Shares in the British-based company closed 22 percent higher at 1,190 pence ($23.35) on Thursday. Imperial Tobacco gained 10 percent to 2,079 pence ($40.80), and British American Tobacco rose 2 percent to 1,455 pence ($28.55). Altadis SA closed 0.3 percent higher at 37.34 euros ($49.62) in Madrid, while Sweden’s Match AB rose 1.8 percent to 126 kronor ($18.53).The Wall Street Journal Asia and the Financial Times identified Gallaher’s potential bidder as Japan Tobacco Inc., sparking a 4.75 percent rise in the company’s shares on the Tokyo Stock Exchange.”We are aware of the media reports, but cannot comment on market speculation,” Japan Tobacco spokesman Yukiko Seto said in Tokyo.Analysts said that should a bidding war for Gallaher – the world’s fifth-largest tobacco company – begin, No. 3 Japan Tobacco would still be the front runner.Gallaher has long been linked to Japan Tobacco, as it holds the right to market and sell Japan Tobacco’s Camel cigarettes in parts of Europe.”We see the tobacco sector broadly benefiting from the Gallaher approach,” said Goldman Sachs analyst Mark Lynch. “Expectations of industry consolidation have been widespread for many years.”Credit Suisse said a tie-up between the two would be a “particularly good strategic fit.” It would address Japan Tobacco’s sub-scale position in Western Europe and strengthen its competitive position in Eastern Europe, the brokerage said.Fitch Ratings said a combination of the two companies would create a group with annual earnings of around $5.2 billion and catapult it to a position of market leader in the high-growth Russian market, with a share of almost 35 percent. That would be ahead of BAT’s 23 percent and Philip Morris International’s 27 percent in the world’s second-largest tobacco market.Gallaher, which employs 12,000 people worldwide, dates back to 1857, when Tom Gallaher started a business making Irish roll tobacco in Londonderry, Northern Ireland.The company has been under pressure in a tough European market, particularly from additional taxation and increased competition in Spain and Austria.It said in September that it was too early to assess the long-term impact of a ban on public smoking in Scotland but thinks similar bans due to be introduced across Britain next year will have a “moderately negative” impact.
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