BAT evaluating sale of small part of ITC stake, confirms in LSE filing

BAT may offload a small portion of its 25.45% stake in ITC via on-market trade, but says no certainty of deal; earlier divestment funded share buyback

British American Tobacco plc (BAT) on Tuesday said that its wholly owned subsidiary, Tobacco Manufacturers (India) Limited (TMI), intends to sell 2.3 per cent of the issued ordinary share capital in ITC Limited to institutional investors by way of an accelerated bookbuild process (block trade).

 

As per the terms of the transaction, the deal size is pegged at $1.36 billion. The shares are being offered at ₹400, a 7.8 per cent discount to the closing price of ₹433.90 per share.

 

As ITC goes ex-dividend by ₹7.85 per share, the discount works out to be 6.5 per cent versus the block deal discount of 8 per cent, bankers said.

 

In a filing with the London Stock Exchange (LSE), BAT said that the transaction would provide increased financial flexibility as it delivers on its commitment to invest in transformation, deleverage, and sustainable shareholder returns.

 

Tadeu Marroco, chief executive of BAT, said in a statement: "ITC is a valued associate of BAT in an attractive geography with long-term growth potential where BAT benefits from exposure to the world's most populous market.”

 

“Whilst this transaction supports delivery on our commitments to BAT shareholders, we continue to view ITC as a core strategic component of our global footprint as we partner on business opportunities in India. I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders."

 

BAT's initial investment in ITC dates back to the early 1900s, and the two companies have a longstanding, mutually beneficial relationship, the maker of Dunhill and Lucky Strike said.

 

Following completion of the proposed block trade, BAT will remain a significant shareholder of ITC, with a 23.1 per cent holding. Prior to this, BAT’s holding in ITC was 25.45 per cent.

 

On March 13, 2024, BAT had sold a 3.5 per cent equity stake in ITC. The block trade sale generated net proceeds, after transaction costs and taxes, of £1.6 billion, which it used to initiate its buyback programme.