Imperial Tobacco to float off Logista distribution unit

Reuters - UK Focus

* Imperial to retain majority of Logista shares

* Imperial takeover of Logista valued it at 2.3 bln euros

* Logista plans to expand in other sectors (Adds historical valuation)

By Martinne Geller and Paul Sandle

LONDON, June 10 (Reuters) - Imperial Tobacco Group is to list its European logistics business Logista on theSpanish stock market with a sale of shares to institutionalinvestors, the British company said on Tuesday.

Imperial gained control of Logista, which distributesproducts for Imperial and other tobacco makers in southernEurope, when it acquired Franco-Spanish business Altadis.

Logista also works for companies in the broader consumergoods sector as well as telecom operators, pharmaceuticalcompanies and publishing houses, distributing their goods toabout 300,000 "delivery points" including shops, petrolstations, pharmacies and hospitals, hotels and restaurants.

Imperial, the world's fourth-largest international tobaccogroup, said on Tuesday Altadis aims to sell a tranche of sharesin Logista through an offer to certain institutional investors but Imperial will retain a majority stake, which some analystsfound surprising.

Imperial's shares were up 0.4 percent at 2614 pence by 1148GMT.

"This means that ... the asset-heavy business will continueto weigh on returns on capital and profitability," saidMorningstar (NasdaqGS: MORN - news) analysts in a research note.

"We expect Imperial to reduce its stake over time," theyadded.

Logista, which Morningstar estimates could be valued in theshare sale at about 1.1 billion pounds ($1.9 billion), generatesa low single-digit operating margin, whereas the tobaccobusiness generates a margin north of 40 percent even as itsrevenue is slipping due to increasing regulation and fewerpeople smoking.

What is more, being in control of store delivery has lesscompetitive value in tobacco than it does for other productslike soft drinks, Morningstar said, since in-store displays areoften heavily regulated.

Imperial, whose brands include Davidoff and Gauloisescigarettes, Golden Virginia and Drum rolling tobacco and CohibaCuban cigars, had said in February it was considering listingshares in Logista.


Logista, which was originally spun off from Tabacalera in1999 when the Spanish tobacco group merged with its Frenchcounterpart SEITA to form Altadis, was still nearly 60 percentowned by Altadis when Imperial bought the Franco-Spanish groupin 2008.

Immediately after the Altadis deal Imperial bought the restof Logista in a mandatory cash offer for the remaining shares ata price of 52.50 euros a share, which valued the entirelogistics firm at some 2.3 billion euros ($3 billion).

Since then, the company's turnover has risen 17 percent toabout 1 billion euros in the last financial year ended Sept. 30,2013, when it made an operating profit of 211 million euros.

In returning to Madrid's stock market Logista follows asuccession of local IPOs this year including eDreams Odigeo in April and Applus Services in May.

Logista's chief executive, Luis Egido Galvez, said the grouphad maintained a solid operating performance in recent yearsdespite a general decline in tobacco volumes and a weak economicenvironment in southern Europe.

His strategy is to further expand in sectors beyond tobacco,as well as improve operational efficiencies and introduce newservices, he said.

Credit Suisse (NYSE: CS - news) and Goldman Sachs (NYSE: GS-PB - news) are jointcoordinators for the IPO and are joined by Morgan Stanley (Berlin: DWD.BE - news) as joint book runners. ($1=0.5956 British pounds) ($1=0.7345 euros) (With additional reporting by Robert Hetz in Madrid; Editing byDavid Goodman and Greg Mahlich)

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