Imperial Tobacco Group PLC Rises On Possibility Of US Brand Acquisitions

Imperial Tobacco Group PLC (LON:IMT) may buy brands from merged US cigarette giants.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The share price of Imperial Tobacco (LSE: IMT) is currently up just over 3% so far this morning, following confirmation that it’s in discussions with Reynolds and Lorillard — the second and third largest US tobacco businesses — regarding the possible acquisition of some assets and brands owned by the two US companies.  

Reynolds’ brands include Winston, Kool and Salem, whilst Lorillard has Newport (the top selling menthol and second largest selling cigarette brand in the US), Maverick and Kent in its portfolio.

british american tobacco / imperial tobaccoThe announcement from Imperial comes as Reynolds is in the final stages of negotiating the purchase of Lorillard, following months of on/off discussions. A potential merger between the two companies was thwarted earlier this by concerns about competition issues, complicated by the fact that British American Tobacco has a 42 per cent stake in Reynolds. Selling some of merged group’s assets and brands to Imperial would be one way of fending off anti-trust concerns from the US government.

Imperial is keen to expand its current 3% market share in the USA, which it says “remains one of the world’s largest and most profitable cigarette markets.” However, the company says that there’s no certainty the deal will go ahead — a merger between Reynolds and Lorillard is still subject to approval by British American Tobacco, and Imperial says that it would go ahead with an acquisition “only if its terms met strict transaction criteria“.

At 2,743p, Imperial Tobacco’s share price has risen 17.5% so far this year, compared with a increase of less than 1% in the FTSE 100. And the tobacco giant is besting the index over five years, too, recording growth of 72%, versus the FTSE 100’s 62% gain in that time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Wallis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Company Comment

Hand of person putting wood cube block with word VALUE on wooden table
Company Comment

Value has been building behind the Diageo share price

Despite the business growing, the Diageo share price first reached its current level just over 19 months ago and hasn't…

Read more »

Older couple walking in park
Investing Articles

5 stocks to buy for high and rising dividend income

I can see a host of shares to buy on the FTSE 100 offering me exceptional levels of income. Here…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I don’t care if FTSE 100 shares fall further, I’m buying them today

I'm happy to go shopping for FTSE 100 shares today, even though I accept that they could have further to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Rolls-Royce shares are down 18% in a month and I’m finally going to buy them

Investors who bought Rolls-Royce shares have been repeatedly disappointed, but I'm willing to take a chance on them before they…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

How I’d invest £10k in a Stocks and Shares ISA today

Now looks like a good time to buy cheap FTSE 100 shares inside a Stocks and Shares ISA. These are…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Today’s financial crisis is the perfect moment to buy cheap shares

I'm building a portfolio of FTSE 100 stocks by purchasing cheap shares whenever I see an opportunity. There's a good…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

I’d buy Tesco shares in October to bag their 5.4% yield 

Tesco shares have fallen lately but I think this makes them attractively valued for a dividend stock I would aim…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I would do anything to hold Diageo in my portfolio (but I won’t do that)

Diageo is one of my favourite stocks on the entire FTSE 100 and I'd love to hold it, but one…

Read more »