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.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
News
ebooksNow available in paperback
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
tech
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
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

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum