Bidding up spirits

18 July 2003 By Rob Cox Follow @rob1cox

Following the return of the hostile bid, these deals show executives wanting assets are prepared to go the distance to acquire them. BAT outbid its rivals by more than 50% for Italy’s ETI. Barr appears ready to pay a massive premium for Galen.

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Galen Pharmaceuticals said Thursday it was in talks that could lead to a takeover. Barr Laboratories of the US is the most likely suitor, the Wall Street Journal reported.

On Wednesday, British American Tobacco agreed to buy ETI, the Italian state tobacco company, for E2.3bn. ETI has a 26% share of the Italian market and – through its subsidiary Etinera – is responsible for the distribution of most tobacco products in Italy. Etinera distributes Philip Morris cigarettes, which account for 67% of the Italian market.

ETI is expected to report earnings before interest, tax, depreciation and amortisation of E190m for the year to September. It has net cash of E86m. BAT reckons it can cut E35m out of the yearly cost base by 2007.

BAT said that the acquisition will be financed out of existing resources, and is expected to be immediately earnings enhancing before the amortisation of goodwill.

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