Shares in Imperial Tobacco Group Plc (LON:IMT) touched an all-time high and closed nearly four percent higher yesterday, amid speculation that that the British cigarette maker could soon face a takeover bid from Japan Tobacco.
The share price jump came as some traders interpreted higher trading volumes as a signal that Japan Tobacco could bid for its UK peer in the near future. Others, however, pointed to possible alternative suitors, including British American Tobacco Plc (LON:BATS) and US giant Altria Group.
According to Investec Wealth and Investment’s Guy Ellison, a deal with Japan Tobacco alone would face antitrust issues in certain markets such as the UK. For these hurdles to be avoided, disposals to a third party would be required - most likely British American Tobacco. However, Morningstar analyst Philip Gorham opined that BAT probably did not have “financial flexibility to do a deal”, even though from a “strategic standpoint” it would be a good fit. Gorham described Imperial Tobacco as “the last remaining transformative deal” in the tobacco industry and tipped Japan Tobacco as the most likely buyer.
Meanwhile, some traders weren’t so convinced that a deal is imminent, pointing to Imperial’s share price having hit an all-time high.
In today’s trading, Imperial Tobacco shares were up0.1 percent at 3,593.39p, as of 10:59 GMT. The stock has risen 26.7 percent since the start of the year and the company’s market capitalisation currently stands at £33.2 billion.
The 18 analysts offering 12 month price targets for Imperial Tobacco have a median target of 3,715p, with a high estimate of 4,100p and a low estimate of 2,700p.As of November 14, 2015, the consensus forecast amongst 21 polled investment analysts covering Imperial Tobacco had it that the company will outperform the market. The same consensus estimate has been maintained since August 24, 2015, when the sentiment of investment analysts improved from “hold”.