This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
20 November 2015
Shares in Imperial Tobacco (IMT) are bucking a negative UK Index this morning, having registered fresh all-time highs on speculation that fellow UK Index giant and rival British American Tobacco (BATS) has been courting bankers about financing for a full takeover. Nonetheless, gains are relatively modest for the supposed prey and well back from their highs of the day, given that talk of a deal has become rather perennial with suggestions from prior years being aired with increasing regularity in 2015, especially since summer’s end. This is evident in the limited reaction to BATS’s share price, with the alleged predator’s investors clearly shrugging off the idea.
With both companies trading around all-time highs, the question is whether now would be the best time to light up an approach, with the surely necessary 20-30% premium needed to take control making make it an expensive deal, needing a fair chunk of debt. Furthermore, regulatory hurdles the world over are likely massive. Then again, investor faith in the defensive and decent-yielding sector could mean that a heavy share component in a combined tobacco giant is acceptable in terms of longer-term upside potential? To be honest we expect the talk to be forgotten by week-end, only to resurface in due course. It’s Friday after all, the rumour mill needs its weekly grind.
Mike van Dulken, Head of Research
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
Comments are closed.