Smoke signals spouting from dealing rooms suggested Imperial Tobacco could soon set the City alight.
Shares of the Lambert Butler and Embassy cigarette manufacturer were puffed up to 2182p before they closed 5p better at 2161p on whispers that China Investment Corporation (CIC), the sovereign wealth fund responsible for managing part of the People’s Republic of China’s foreign exchange reserves, could be on the verge of acquiring a strategic stake, possibly prior to launching a break-up cash bid worth £35p a share.
CIC bought a $3billion stake in private equity giant Blackstone and a 9.9 per cent stake in Morgan Stanley worth $5bn in December 2007. It aims to invest in around 50 large enterprises across the world and, according to sources, Imps is now at the top of its shopping list.
Imps is the world’s fourth largest independent cigarette manufacturer and is run by Alison Cooper. She became only the second British woman appointed to run a Footsie company when she took over the reins from Gareth Davis in May 2010. Earlier this year she warned that price competition in Spain in May and June would result in a £70m decline in underlying profits in 2011.
A recent update confirmed trading remained in line with expectations. Tobacco net revenues are expected to be up 2 per cent for the full year on a decline in organic volumes of 2 per cent.
Ever since Japan Tobacco swallowed Gallaher in a £9billion-plus deal years ago, the market has been expecting the tobacco trade to shrink to only three players, Japan Tobacco, Philip Morris and Bats. Imps is most vulnerable. Analysts reckon should a bidder pounce on Imps, it would have no problem finding a buyer for its cigar business.
Rival British American Tobacco, which has often been mentioned in the same breath as Imps, lost 3.50p to 2793p.