Buyout firms’ €12.8bn Altadis bid raises the stakes

European buyout firms CVC and PAI’s €12.8 billion bid for Spanish tobacco company Altadis surpasses Imperial Tobacco’s rival offer last month and could trigger a bidding war.

 European buyout firms CVC Capital Partners and PAI have made a €12.8 billion (€17.4 billion) offer for Spanish tobacco company Altadis.  

The bid values Altadis at €50-a-share, €3 above last month’s rejected bid from UK rival Imperial Tobacco. The tobacco company’s shares were trading up 3.67 percent to €50.30 at 1738 CET indicating the market’s conviction that a battle may well break out over the company.

As well as the potential counter-offer from Imperial, the world’s fourth largest tobacco company, the firms may also face opposition from rival European buyout house Cinven. The European firm was believed to be considering joining the private equity consortium, but it is now reportedly preparing a bid with British American Tobacco, the world’s second biggest cigarette maker.

Altadis, which manufactures Gauloises, Gitanes, Ducados and Fortuna Cigarettes, said Imperial’s earlier bid had undervalued the company. In March, Imperial also had an earlier €45-a-share bid rejected.

After the collapse of CVC’s Sainsbury’s bid last month analysts think it is likely the buyout firms will fight hard in an attempt to land Altadis. 

If the bid succeeds it will be the biggest leveraged buyout in the tobacco industry since US buyout firm Kohlberg Kravis Roberts’s $31 billion (€24 billion) takeover of RJR Nabisco in 1989.