(Alliance News) - British American Tobacco PLC on Tuesday provided more details of its plan to sell a portion of its interest in ITC Ltd and use the proceeds to buy back its own shares.
The London-based maker of cigarettes and vapes said it intends to dispose of up to 436.9 million shares to institutional investors through an accelerated bookbuild process. The block trade shares represent up to 3.5% of ITC.
ITC is a Kolkata, India-based company. It is India's biggest cigarette maker but has diversified into other businesses as well, including luxury hotels.
After the sale, BAT will own 25.5% of ITC.
BAT could net just over USD2 billion from the ITC stake sale. ITC closed down 1.8% to INR401.90 on the National Stock Exchange of India on Tuesday. It has a market capitalisation of INR5.05 trillion, about USD61 billion, so a 3.5% stake is worth about USD2.14 billion.
Shares in BAT rallied 3.0% to 2,387.00 pence each on Tuesday afternoon in London, while in Johannesburg, they advanced 3.7% to ZAR567.95.
The announcement on Tuesday comes shortly after BAT confirmed on Monday it was evaluating the potential disposal of part of its shareholding in ITC. This is not the first time that BAT has hinted about a sale of its ITC stake. It said it was regularly reviewing its stake in ITC in February when it reported its annual results.
On Tuesday, BAT said it intends to use the net proceeds of the block trade to buy back its own shares over a period ending December 2025, starting with GBP700 million in 2024.
BAT said ITC is its valued associate in an "attractive" market, with long-term growth potential where BAT benefits from exposure to the world's most populous market. Its initial investment in ITC dates back to the early 1900s.
"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 Chief Executive Officer Tadeu Marroco said.
By Artwell Dlamini, Alliance News reporter
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British American Tobacco (BATS)