UK/JAPAN. Tobacco company Gallaher yesterday confirmed it had received a takeover approach, reliably understood to be from Japan Tobacco.
In a statement Gallaher said: “Gallaher Group Plc notes the recent speculation concerning the possibility of an offer being made for Gallaher. The company confirms that it has recently received an approach which may or may not lead to an offer. The approach is preliminary and there can be no assurance that any offer will be made. A further announcement will be made when appropriate.”
UK newspaper The Financial Times was the first to reveal that the bid was from Japan Tobacco.
It noted: “A new round of consolidation among the Western world’s leading cigarette makers has been expected for years. Japan Tobacco lags a long way behind Philip Morris and BAT as the third biggest company, with a 7.5% market share. Gallaher, which owns the Benson & Hedges brand, is a little smaller than Imperial and has just over 3% of the market.”
Gallaher shares closed Thursday at £11.90, up a whopping £2.11 or +21.6% on the bid.
The Financial Times cited analysts who speculated that Gallaher might be able to hold out for as much as £12 a share, valuing the total equity at £7.8 billion. “If it happens at this level, it will be Japan Tobacco that does it,” one tobacco analyst told the newspaper. “My gut feeling is it will happen. But if Gallaher’s price creeps higher, the danger of it falling through starts to increase.”
The report continued: “Talks between the two companies are only in the preliminary stages, but some observers believe the deal will be completed in days rather than weeks.”
The acquisition of Gallaher would fit with Japan Tobacco’s strategy of dominating the former Soviet bloc. If it bought Gallaher the Japanese group would control roughly 35% of that region, The Financial Times said.
