British American Tobacco is Likely to Prepare an Offer for Imperial Tobacco

January 13, 2016

Shares in Imperial Tobacco increased to a new all-time high recently after City experts re-ignited rumors that one of the company’s associates could be about to make an deal for the group. British American Tobacco (BAT) has been stated as one of the probable bidders for Imperial. However Imperial may be too significant for British American to swallow whole without any help. This has brought to rumors that some Imperial’s peers will get together and provide any offer to purchase different parts of the company.

British American Tobacco

Breaking Imperial up would also support any possible buyers work their way regarding any anti-trust challenges that may show up with regulators worldwide. Well, it all comes down to market share. Imperial owns a 16% share of the European tobacco market, tightly followed by Japan Tobacco with about 18% share. British American owns a 21% share of the European tobacco market, and Philip Morris handles 38% of the market. To bypass the anti-trust regulators, it is most likely that Japan Tobacco would give an offer for Imperial’s European operations.

In Russia, Japan Tobacco that regulates over a third of the market. Imperial as just stated possesses a market share of around 10% and British American comes close second with a market share of approximately 21%. If British American were going to make an offer for Imperial’s Russian operations, it would take the tobacco leader's share of the market to about 31%, in accordance with that of Philip Morris and Japan Tobacco. In Indonesia, Imperial regulates about 28% of the tobacco market via its Gudang Garam branch. Japan Tobacco has no direct exposure to the region, Philip Morris owns a market share of around 35% and British American controls 8% of the market. With this being the case, both Japan Tobacco and British American could be possible buyers for Imperial’s Indonesian assets.

The final key market, the US, is more complicated than any other. Without a doubt, the market has three major players, Reynolds American (32%), Altria (51%) and Imperial (10%). Nevertheless, British American possesses the greater part in Reynolds American while Altria is basically the US arm of Philip Morris. Japan Tobacco has no publicity to the region. On the whole, it seems as if British America and Japan Tobacco are Imperial’s more than likely suitors, according to present market share details.