Gallaher muscles in on Seita and Tabacalera deal with pounds 2.48bn bid

GALLAHER, THE tobacco company that produces the Silk Cut and Mayfair cigarette brands, was moving last night to uproot an agreed link- up between Spanish rival Tabacalera and France's Seita, by making an alternative friendly merger offer to the French company.

A source close to Gallaher confirmed that it had approached Seita with an opening offer of 75 euros per share as a basis for detailed talks. This would value the maker of Gauloise and Gitanes cigarettes at 3.9bn euros (pounds 2.48bn).

This would outgun the stock and cash deal for Seita that was agreed at 3.09bn euros or 59.28 euros per share last month. Gallaher's proposal could see the companies merge, although it is unclear how management positions would be split in a combined group or how much cash would be involved.

Seita stock was suspended on the Paris bourse yesterday after rising 13.8 per cent to 58 euros. Gallaher closed down 2p at 368p. Should Gallaher, which has a market capitalisation of pounds 2.2bn, press ahead with a formal deal proposal, it would upset the French and Spanish governments, both of which have backed the link-up. Seita and Tabacalera have long operated as state-owned monopolies, but have been increasingly privatised in recent years.

"There has been this perception that Gallaher has fallen behind Imperial Tobacco in terms of doing deals abroad," said Charles Pick, an analyst with WestLB Panmure.

"Gallaher has made no secret of the fact that it wishes to participate in international consolidation."

Although Paris and Madrid as well as the companies' managements are anxious for the Franco-Iberian deal to proceed, analysts said that market sentiment hasn't been as favourable. The French government retains a 3 per cent stake in Seita, which is considered ripe for major cost-cutting. The Spanish government holds a substantial controlling interest in Tabacalera.

Gallaher, which was demerged in 1997 from American Brands, is judged to be anxious to strike a deal. "Gallaher is very exposed to the UK market, which is declining very quickly," said an analyst. "A deal would also provide defence from a possible hostile take-over."

The proposed Seita-Tabacalera merger or an alternative deal with Gallaher would create the world's fifth-biggest tobacco group after Philip Morris, British American Tobacco, Japan Tobacco and China's state-owned tobacco industry.

Even though the number of smokers in Britain is growing, following years of decline, smuggling is rising more quickly. Analysts blame Britain's tobacco taxes, among the world's highest, for the fact that 20 per cent of pre-made cigarettes and 80 per cent of bulk rolling tobacco are smuggled from abroad.

The financial logic behind tobacco company mergers has been buttressed in recent months as cost savings have rapidly materialised since the June tie-up of BAT and Rothmans International. As part of a three-year plan to reduce costs by pounds 250m, BAT on Tuesday announced the closure of a plant in Spennymoor, County Durham, and other cost-saving measures.

Since its demerger, Gallaher stock has performed in line with the all- share index. However, in the past two months the shares have fallen nearly 20 per cent amid eroding sentiment for tobacco issues, some of which face mounting litigation claims in United States courts.

News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
i100This Instagram photo does not prove Russian army is in Ukraine
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
News
Morrissey pictured in 2013
people
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
people
News
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine