BAT snaps up Imasco for $6.8 bn

LONDON, Aug 3: British American Tobacco Plc -- which reported a 14 per cent rise in first half 1999 profits -- on Tuesday said it would b...

LONDON, Aug 3: British American Tobacco Plc — which reported a 14 per cent rise in first half 1999 profits — on Tuesday said it would buy the 58 per cent of Imasco Ltd it does not own and break up the Canadian group.

"The transaction represents a further step in British American Tobacco’s strategy to become the world’s leading international tobacco company, allowing us to concentrate on our strength in managing tobacco assets," chairman Martin Broughton said.

The half-year results showed underlying profits and cigarette volumes, stripping out one-off effects, both slipped nine per cent, with volumes hurt by US price rises to fund the state’s Medicaid settlement, the start of an export tax in Brazil and weak exports in Asia.

BAT shares slipped seven pence to 528P in a lower London stock market, although the company said that underlying 1999 operating profits should be similar to 1998 even before the effect of the takeover of Rothmans completed in June this year.

"Although forecasting is clearlydifficult in the current circumstances, the board remains of the view that operating profit before exceptional items for the full year should be close to 1998, before taking account of the Rothmans merger," Broughton said in a statement.

Merrill Lynch analyst Jonathan Fell said the first half results were towards the top of expectations and the company’s flat underlying year forecast after a nine per cent first half decline implied a big improvement in the second half.

BAT said Rothmans’ results since the merger were not included in its first half, and will be first reflected in the group’s nine months results. The Imasco deal values the Canadian unit at 7.3 billion pounds. As part of the restructuring BAT will sell Imasco’s 98.2 per cent-owned unit CT Financial Services to Toronto-Dominion for C$67 per share, leading to BAT receiving 3.2 billion pounds.

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After the sale of Shoppers and Genstar, BAT’s only business in Canada will be Imperial Tobacco which has a 69 per cent share of the Canadian tobaccomarket. BAT said the Imasco transaction is expected to be marginally earnings enhancing.

BAT declared an interim dividend of 4.3 pence, which together with the special interim of 4.0 pence paid in July, was a four per cent increase over the 1998 interim dividend.