[Intl-tobacco] Imperial's global march set to continue

[robert weissman]

Imperial's global march set to continue
 >By Lisa Urquhart
 >Published: October 31 2005 02:00 | Last updated: October 31 2005 02:00
 >>

The government may have finally come to a decision on smoking in public
places, but Gareth Davis, chief executive of Imperial Tobacco, is still
unhappy with the compromise.

Mr Davis, a committed consumer of the group's products, has made his
views clear about the smoking ban claiming that even the proposed
restrictions, which only cover work places and bars serving food, are
still "disproportionate and a step too far".

The 55 year-old Bolton football fan has long argued that provision could
be made to ensure that both smokers and non-smokers were accommodated
without the need for restrictions.

It may not be a view that would strike any resonance with anti-smoking
groups such as Action on Smoking Health but Mr Davis has made a career
of doing what he pleases and in turn pleasing shareholders.

Over the past five years Bristol-based Imperial has seen its shares more
than double from 570p to =A315.70 under his stewardship. Most of the
growth has been provided by Mr Davis's acquisition strategy that has
turned Imperial from a UK into an international company.

Imperial, which was spun out of conglomerate Hanson in 1997, first
started plotting its plans for globalexpansion with the the acquisition
of 75 per cent of Tobaccor in 2001. The deal gave it a share of the
growing sub-Saharan African market. But perhaps the biggest
transformation came from the acquisition of 90 per cent of Reemtsma, the
international German cigarette group, a year later.

Pulling off acquisitions is one thing, but Imperial has one of the best
reputations in the industry for wringing the last penny of cost savings
from purchases and keeping no sacred cows. During this year Imperial has
closed its Dublin cigarette factory and its Montrealfilter tubes plant.

Like other tobacco companies, Imperial's international ambitions have
been about diversifying it away fromits traditional UK home, where sales
are in steady decline.

But recently the group has faced heavy going inGermany, one of its key
markets, where three government tax increases in the past 18 months have
left cigarette sales across the whole industry 19 per cent lower this year.

However, in September Imperial demonstrated some of the corporate
canniness that it has become known for. It took the sting out of the
latest tax rise on German cigarettes of 1.2 cents a pack by cutting the
number of cigarettes in a pack from 19 to 17 and lowering the selling
price of a pack by 20 cents.

Imperial could see its march across the globe continue, as Mr Davis has
made no secret of his desire to do one last deal before he eases himself
out of the big chair in five years time - company rules mean he has to
retire when he hits 60.

The lack of opportunity has recently led Imperial to reward shareholders
with a series of share buy-backs. As of September, the group acquired
13.5m shares, or almost 2 per cent of the share capital, for a price of
=A3200m.

Getting money back is a small price for patience, but shareholders can
rest assured that ambitious Mr Davis will not be idle on the acquisition
front for too long.