[Intl-tobacco] British American Tobacco eager to make friendly acquisitions - The Independent

[Robert Weissman]

British American Tobacco eager to make friendly acquisitions - The Independ=
ent
 By Susie Mesure
 Wednesday, 26 February 2003


 British American Tobacco signalled its hunger for acquisitions
yesterday as it launched a share buyback programme of up to
 =A31bn.

 Martin Broughton, the chairman, said: "Acquisitions still remain our
primary use of cash. If there had been an acquisition
 opportunity in 2002 we would have done it."

 BAT denied the share buyback plan, which will see it repurchase up to
7.5 per cent of its stock, was intended as a substitute for a
 large deal. "It will not preclude us from taking advantage of industry
consolidation should the opportunity arise," Mr Broughton
 said.

 The company, which counts Lucky Strike, Pall Mall, Dunhill and Kent as
its leading cigarette brands, is among the front-runners
 to buy the Italian state tobacco company Ente Tabacchi Italiano.

 Although Mr Broughton declined to comment on BAT's likely interest in
acquiring Gallaher, its UK rival, he appeared to rule out
 a hostile approach by admitting that the group preferred a friendly
takeover when there were competition hurdles. A bid for
 Gallaher would result in considerable overlap in markets such as
Germany, Austria and Ireland.

 Mr Broughton's comments came as BAT unveiled a 2 per cent rise in
pre-tax profits for 2002 to =A32.1bn, in line with expectations.
 But it said volumes fell by a sharper-than-expected 4 per cent to 777
billion cigarettes on the back of a reduction in its duty free
 sales, the worsening economic climate and price increases in South America=
.

 Mr Broughton said 2002 had been "tough, with no improvement in sight".
He cautioned that a further deterioration in the strength
 of the US dollar could further hit profits in 2003. Operating profits
before exceptionals and goodwill fell 3 per cent last year, from
 =A32.77bn to =A32.68bn, on the back of a weaker dollar.

 BAT said its share buyback programme would take about one year to
complete. Its biggest shareholder, R&R Holdings, with a
 27.7 per cent stake, is not taking part to avoid crossing the 29.9 per
cent threshold, which would force it to bid for BAT.