British American confirms plan to launch buyback after Indian partner stake sale
British American Tobacco (BAT) has confirmed it plans to sell a chunk of its stake in Indian partner ITC.
The tobacco giant said on Tuesday it had launched a proposed sale of up to £436.8m worth of ITC shares to institutional investors through block trades. If all goes as planned, this sale will represent about 3.5 per cent of ITC’s total shares.
Shares in the London-listed tobacco company rose as much as three per cent on Tuesday following the news. The stock is down over 22 per cent in the past year.
The Lucky Strike cigarette maker’s stake will remain at around 25.5 per cent so that it can keep board seats and its veto right.
Tadeu Marroco, CEO of BAT, said: “I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders. We look forward to remaining important shareholders in ITC as it continues its journey of growth.
BAT intends to use the money raised from this sale to buy back its own shares until December 2025, starting with £700m in 2024. It plans to use its operational profits to invest in its own growth and reduce its debt further.
Last month, BAT said it has been “actively working” towards a partial sale of its 29 per cent stake in ITC, an Indian consumer goods conglomerate that also operates hotels, sending shares up six per cent.
Jefferies analyst Owen Bennett said keeping the stake above 25 per cent is important for a couple of reasons.
“One, the Indian tobacco market is significant, and BAT has an advantage over peers currently as it acquired its stake before the government introduced limits on foreign direct investment in tobacco. Peers
would like to get more exposure, but can’t.
“Two, in addition to being a significant tobacco market, it also has the potential to be a significant reduced risk market in the future, both for inhalables, but also oral nicotine, the Indian market having a significant oral market alongside combustibles,” he explained.