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Altadis Rejects Second Bid

Michael Moretti
Posted: April 10, 2007

Calling yesterday's offer still not high enough, Spain's Altadis S.A. rejected a second unsolicited takeover bid from Britain's Imperial Tobacco Group.

The revised bid came in at $12 billion euros ($16 billion), a 4.4 percent increase over the initial offer in mid-March, which came in at 11.5 billion euros ($15.3 billion). This equates to 47 euros per share, up from 45 euros per share.

"Imperial's revised proposal fails to reflect the strategic value of the company, the diversity of its unique assets, or its prospects for future growth and [the Board of Directors] has therefore unanimously decided to reject it," said Altadis in a statement similar to the one it issued in March rejecting the initial offer.

Altadis, the world's largest cigarmaker, has a 50 percent stake in Cuba's Habanos S.A., the worldwide distributor of Cuban cigars, as well as sole ownership of Dominican-made Montecristo and H. Upmann producer Altadis U.S.A., which is based in Fort Lauderdale, Florida.

"The euro 47 per share represents a full and fair price for Altadis," said Imperial, the world's fourth largest publicly traded tobacco company, in a statement following the rejection.

As reported in the March 27 issue of Cigar Insider, cigars would be a smaller part of this deal than cigarettes. In addition to its cigar and logistics business, Altadis makes Gitanes and Galouises cigarettes. Imperial, which is headquartered in Bristol, England, makes Davidoff and West cigarettes, among many others. It also makes Drum rolling tobacco and has an extremely small cigar business, with a machine-made brand called Classic that it sells in the United Kingdom. The company had sales of £11.7 billion ($23 billion) in 2006.

Altadis had sales of 4 billion euros ($5.3 billion) in 2006. Sales of cigarettes, the biggest sector at 1.7 billion euros, declined 14.5 percent. Cigar sales were up 0.4 percent to 888 million euros ($1.2 billion). While cigarettes are the primary gem, cigars are part of the allure that Altadis holds for Imperial. "I think Imperial is quite interested in the Altadis cigar business," said a tobacco sector analyst. "Imperial has always stressed it is a multiproduct tobacco company." Altadis also has a much greater sales presence in the United States, virtually unknown territory to Imperial. "The U.S. offers great potential for the group," wrote Imperial in its latest annual report.

Imperial said that "it continues to believe that a combination with Altadis is strategically compelling and in the interests of both companies' shareholders."

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