Shares in British American Tobacco gained the most in almost four years after it revealed it was looking to offload part of its £15bn stake in India’s biggest cigarette firm.
The maker of Lucky Strike and Dunhill said it planned to offload a portion of its 30 percent stake in ITC.
BAT CEO Tadeu Marroco said the potential liquidation “offers us the opportunity to free up and reallocate some capital.”
The company has held a stake in ITC for more than 100 years and the stake has been subject to numerous regulatory restrictions, it added.
The prospect of a sell-off sent shares higher amid hopes it will free up cash to distribute to investors.
BAT CEO Tadeu Marroco (pictured) said the potential liquidation “offers us the opportunity to free up and reallocate some capital.”
The stock ended the day up 7.1 per cent, or 165p, at 2,484p.
BAT last launched a £2bn share buyback program in February 2022 but decided not to renew it last year.
“This would be very positive as it would bring the important share buyback timeline closer for investors,” said RBC Capital Markets analyst James Edwardes Jones.
Rival Big Tobacco players have been looking to sweeten investors.
London-listed Imperial Brands has a £1.1bn share buyback plan underway, while Altria announced an £800m buyback last week.
BAT’s rally came as it posted a loss of £15.8 billion for 2023, down from profits of £10.5 billion the previous year. This followed a £27.3bn write-down on US cigarette brands.
The company said in December that Camel, Natural American Spirit, Newport and Pall Mall – brands acquired in a £40bn takeover of cigarette giant Reynolds American in 2017 – are worth much less than expected.
However, the charge was higher than the £25bn it had originally warned of.
The company attributed this to currency movements. Cigarette companies in general have suffered as consumers shift to vaporizers.
BAT’s revenues amounted to £27bn for the year, down 1.3 per cent on the previous year.
Its “smoke-free” business, which includes nicotine vapes and pouches, was profitable for the first time, raking in £398m.
BAT’s vaping product sales rose about 7 percent in 2023, while nicotine pouch sales rose by more than a third.
It appeared to allay concerns around the UK’s upcoming ban on disposable vaping, which aims to tackle the rise in vaping among young people.
Marroco said this wouldn’t have a big impact thanks to his company’s rechargeable vaping products, including Vuse.
“Because we have a modest share in disposable vaporizers, we would be in a stronger position, because we are a leader in refillable vaporizers,” he said.
Looking ahead, BAT said global tobacco sales are expected to decline 3 percent, driven by weak performance in the United States.