Buyout firm CVC Capital Partners, which this week saw the collapse of its £10 billion bid for UK grocer Sainsbury’s, is reportedly hoping to bounce back by bidding for Altadis, a Spanish tobacco group that has just rejected an offer from a UK rival.
CVC is talking to a number of potential partners about an €11.5 billion bid, according to media reports. It could submit a joint offer alongside French firm PAI partners and UK firm Cinven, both of whom have also submitted expressions of interest to the Altadis board. Alternatively, it may team up with a trade buyer – the London-based Times newspaper reports that it has held tentative talks with British-American Tobacco, the second biggest company in the sector.
The news comes just days after Altadis rejected a €47 per share offer from Imperial Tobacco, a UK rival. This was Imperial’s second attempt to buy the business, after having an unsolicited €45 per share bid rejected in March.
Reports suggest that Altadis is keen to encourage private equity interest, as it looks to drive up its price ahead of a possible third bid from Imperial.
Given its steady cashflows, tobacco companies would seem like a natural fit for a private equity buyout. However, many firms are choosing to stay away from the sector amid mounting fears of class-action lawsuits, changes to the regulatory environment and the falling number of smokers in the developed world – which will limit the number of potential partners for any prospective bidder.