British American Tobacco share price: Group proposes buyout of Brazilian cigarette maker

British American Tobacco Plc (LON:BATS) has submitted an offer with a Brazilian regulator to acquire the 24.7 percent stake it doesn’t yet own in Souza Cruz, Brazil’s largest cigarette maker, in a deal that is estimated in the region of £2.3 billion. According to analysts, the FTSE 100 tobacco major likely plans to take advantage of a recent drop in the Brazilian real to extend its strategic position in Latin America.

BAT said in a regulatory statement issued this morning that it has filed a request with Brazil’s securities regulator, the Comissão de Valores Mobiliários (CVM), through its Brazilian subsidiary. The world’s second-largest cigarette maker called for a public tender offer to buy up the remaining shares in Souza Cruz at a price per share of 26.75 reals in cash. Should the acquisition take place, BAT will then proceed to delist the firm from the São Paulo Stock Exchange.

BAT had already made their plans for a possible offer for Souza Cruz minorities last week, with company spokesman Will Hill cited across the media as saying that a deal would be “strategically attractive”. The buyout, which will include an estimated 30 percent premium over Souza Cruz’s volume-weighted average closing price over the past three months, would give the British-based tobacco major full control over Souza Cruz, which currently holds about 80 percent of Brazil’s cigarette market.

Bloomberg quoted Martin Deboo, an analyst at American investment bank Jefferies as saying that the deal represents “a bit of sensible opportunism by BAT”. With the pound appreciating nearly 14 percent since last March the FTSE 100-listed tobacco giant “can buy the asset at a very compelling price”.
As of 13:03 GMT today, British American Tobacco’s share price stood at 3,783.86p, up 0.73 percent intraday. The group’s stock has climbed over seven percent since the start of the year.
According to the Financial Times, as of 28 February 2015, the consensus forecast amongst 25 polled investment analysts covering British American Tobacco plc has it that the company will outperform the market. The median target of the 17 analyst offering 12 month price targets is 3,800p with a low estimate 2,925p and a high estimate of 4,150p.
As of 13:55 GMT, Tuesday, 03 March, British American Tobacco plc share price is 3,775.75p.