BAT Profits Rise

[Robert Weissman <rob@essential.org>]

BAT Profits Rise, Snaps Up Imasco
August 3, 1999 5:55 AM EDT


By David Jones

LONDON (Reuters) - British American Tobacco Plc Tuesday reported a 14
percent rise in first half 1999 profits and said it would buy the 58 percent
of Imasco Ltd it does not own and break up the Canadian group.

BAT, the world's second largest cigarette company, with brands such as Lucky
Strike and State Express 555, reported first half profits to June 30 of 661
million pounds ($1.07 billion), helped by an absence of any exceptional
charges.

BAT will pay a minimum of C$40 cash per Imasco share, or 4.2 billion pounds
($6.8 billion), with the final amount depending on the price obtained from
the planned sell-off of Imasco's drugstore and property businesses Shoppers
and Genstar. As part of the plan, BAT has agreed to sell Imasco's CT
Financial Services unit to Toronto-Dominion Bank.

The Imasco move extends BAT's strategy to focus solely on tobacco, which
started in September 1998 with the demerger of its British and U.S.
insurance interests.

This was followed by the acquisition of Rothmans, announced in January,
creating a 13 billion pound global giant and boosting BAT's world cigarette
market share to 16 percent, within striking distance of Marlboro owner
Philip Morris.

``The transaction represents a further step in British American Tobacco's
strategy to become the world's leading international tobacco company,
allowing us to concentrate on our strength in managing tobacco assets,''
Chairman Martin Broughton said.

The half-year results showed underlying profits and cigarette volumes,
stripping out one-off effects, both slipped nine percent, with volumes hurt
by U.S. price rises to fund the state's Medicaid settlement, the start of an
export tax in Brazil and weak exports in Asia.

BAT shares slipped seven pence to 528p in a lower London stock market,
although the company said that underlying 1999 operating profits should be
similar to 1998 even before the effect of the takeover of Rothmans completed
in June this year.

``Although forecasting is clearly difficult in the current circumstances,
the board remains of the view that operating profit before exceptional items
for the full year should be close to 1998, before taking account of the
Rothmans merger,'' Broughton said in a statement.

Merrill Lynch analyst Jonathan Fell said the first half results were toward
the top of expectations and the company's flat underlying year forecast
after a nine percent first half decline implied a big improvement in the
second half.

BAT said Rothmans' results since the merger were not included in its first
half, and will be first reflected in the group's nine months results.

The Imasco deal values the Canadian unit at 7.3 billion pounds. As part of
the restructuring BAT will sell Imasco's 98.2 percent-owned unit CT
Financial Services to Toronto-Dominion for C$67 per share, leading to BAT
receiving 3.2 billion pounds.

After the sale of Shoppers and Genstar, BAT's only business in Canada will
be Imperial Tobacco which has a 69 percent share of the Canadian tobacco
market. BAT said the Imasco transaction is expected to be marginally
earnings enhancing.

BAT declared an interim dividend of 4.3 pence, which together with the
special interim of 4.0 pence paid in July, was a four percent increase over
the 1998 interim dividend.

($1-.6186 Pound)

($1-.6186 Pound)


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