Buyout firms could enter Altadis race

Three private equity firms are reportedly in talks with British American Tobacco about submitting a rival bid for Altadis, a Franco-Spanish cigarette maker that has become a bid target in the latest round of consolidation in the industry.

CVC Capital Partners, Cinven and PAI Partners have all reportedly been approached by BAT, the world’s second biggest tobacco company, about a possible joint bid for Franco-Spanish group Altadis.

Some Altadis cigars

The London-based Times newspaper reports that BAT has approached the buyout firms as it considers taking on trade rival Imperial Tobacco, which has already offered £9.5 billion for Altadis and is expected to increase its bid.

BAT had been considered unlikely to bid for Altadis, after its chief executive Paul Adams recently complained that tobacco stocks were over-priced.

However, Altadis is seen as one of the only remaining targets in the highly consolidated sector, making it harder for BAT to opt out of the bidding.

The Times reports that the deal could involve BAT keeping most of the cigarette and cigar brands, while spinning off the distribution arm to a private equity partner. The division would be attractive to buyout firms because of its stable cashflows.