Imperial Tobacco Group to list European logistics business Logista on Spanish stock market
11 Jun 2014
Imperial Tobacco Group plans to list its European logistics business Logista on the Spanish stock market with share sales to institutional investors, the company said on Tuesday.
In April Reuters reported Imperial Tobacco is closing cigarette factories in England and France with around 900 job losses as it struggles with declining European sales (See: Imperial Tobacco is closing cigarette factories in England and France with around 900 job losses as it struggles with declining European sales).
The UK company gained control of Logista, which distributes products for Imperial and other tobacco makers in southern Europe, with its acquisition of Franco-Spanish business Altadis.
Logista services companies in the consumer goods sector, telecom operators, pharmaceutical companies and publishing houses. These goods are distributed to about 300,000 "delivery points" including shops, petrol stations, pharmacies and hospitals, hotels and restaurants.
According to Imperial, the world's fourth-largest international tobacco group, Altadis would sell a tranche of shares in Logista through an offer to certain institutional investors but Imperial would retain a majority stake, which according to some analysts, was surprising.
The company's shares rose 0.4 per cent at 2614 pence by 1148 GMT.
"This means that ... the asset-heavy business will continue to weigh on returns on capital and profitability," said Morningstar analysts in a research note.
"We expect Imperial to reduce its stake over time," they added.
Logista, which, according to Morningstar estimates, could be valued in the share sale at about £1.1 billion, generates a low single-digit operating margin, as against the tobacco business which delivers a margin over 40 per cent even with its revenue falling amid increasing regulation and fewer smokers.
The IPO would see Imperial pay off part of its £11.1 billion of net debt, giving room to participate in deals that might become necessary in the event Reynolds American Inc were to bid for Lorillard Inc, according to Erik Bloomquist, an analyst at Berenberg Bank in London.
He added, it gave the company a bit more flexibility if it were interested in picking up any brands that could come up for sale after a Reynolds/Lorillard merger, Bloomquist said. According to his estimates, at least four brands -- Kool, Salem, Winston and Maverick -- could become available for as much as $5 billion.
Imperial Tobacco spokesman Simon Evans declining comment on the speculation, added that the company had always viewed the US as a growth market.
Logista is the fifth company to announce share sales plans this year in Spain as the economy of the country emerged from three years of economic contraction.
