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BAT will pay 20.3 billion Danish kroner for ST units including Prince cigarettes and Fiedler & Lundgren, the Swedish maker of snus powdered tobacco. London-based BAT already owned 32 percent of Soeborg, Denmark-based ST. The shares climbed to a six-week high. It's the second purchase unveiled by BAT this month, following last week's $1.72 billion bid for Turkey's state-owned Tekel. The world's second- largest publicly traded cigarette maker is raising prices as a wave of takeovers reduces competition in the tobacco industry. ``The deal is immediately earnings-per-share accretive and is set to generate 60 million pounds of cost synergies annually by 2011,'' Merrill Lynch analyst Nico Lambrechts wrote in an e- mailed note. ``We would expect the stock to trade strongly.'' Skandinavisk Holding, ST's controlling shareholder with 64.7 percent, will retain the company's cigar and pipe tobacco businesses and some other units, including a Copenhagen amusement park. The remaining stake in ST besides BAT's holding is owned by employees. BAT is paying Skandinavisk Holding 11.3 billion kroner, or 1.15 billion pounds, for its stake in the ST units. London-based BAT also said today that full-year profit rose 12 percent to 2.13 billion pounds ($4.2 billion), missing the 2.17 billion-pound median of 10 analyst estimates in a Bloomberg survey. The company also cut its share buyback target this year to 400 million pounds. Tobacco Takeovers ``Brand strength, marketing and geographic exposures will become critical to longer term earnings growth,'' Jonathan Leinster, an analyst at UBS with a ``buy'' rating on BAT, wrote in a note to investors before today's announcement. BAT rose 39 pence, or 2 percent, to 1,978 pence at 8:03 a.m. in London today, the highest since Jan. 11. The stock added 38 percent in 2007, more than the 17 percent gain by larger rival Altria Group Inc., the maker of Marlboro cigarettes. Takeovers such as Japan Tobacco Inc.'s purchase of Gallaher Group Plc in April cut the number of companies in the industry, giving those that remain more leverage to increase prices. BAT said it aims to reach annual savings of 800 million pounds by 2012 after cutting 1 billion pounds of costs in the past five years. BAT no longer has any U.K. factories and is scheduled to shut a Dutch plant this year. Sales gained 2.6 percent to 10 billion pounds, more than the survey's 9.87 billion-pound median estimate. Profit from operations rose 11 percent to 2.91 billion pounds, less than the 2.99 billion pounds estimated by the analysts. CFO Retires Chief Financial Officer Paul Rayner will retire April 30 and return to Australia for ``family reasons,'' BAT also said. Ben Stevens, BAT's European regional director, will succeed him. BAT is charging more for tobacco in countries from Brazil to Russia and has shut plants in western Europe and North America as developed markets restrict smoking. The Tekel purchase gave the company access to a market where 60 percent of adult males smoke. Tobacco consumption is falling 1 percent to 2 percent a year in western Europe because of higher taxes and bans on advertising and indoor smoking. England prohibited smoking inside public places such as pubs in July, and France and the Netherlands are tightening restrictions this year. While sales are ebbing in developed markets, more people are smoking in emerging markets, helping BAT stock to triple over the past five years. Chief Executive Officer Paul Adams beat the company's goal for earnings-per-share growth in the high single digits every year between 2004 and 2006. BAT was started in 1902 to settle a trade war between U.S. and U.K. cigarette makers and once owned companies from American retailer Saks Fifth Avenue to British insurer Eagle Star. Geneva- based Cie. Financiere Richemont SA, the world's largest jewelry maker, owns about 19 percent of BAT and has said it would mull spinning off the holding. Tobacco use will kill 1 billion people this century, a 10- fold increase over the previous 100 years, unless governments in poor nations raise taxes on consumption and mandate health warnings, the World Health Organization says. © Copyright 2006 by CigarettesOn.Com |
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