By Martinne Geller and Paul Sandle
LONDON (Reuters) - Imperial Tobacco Group is to list its European logistics business Logista on the Spanish stock market with a sale of shares to institutional investors, the British company said on Tuesday.
Imperial gained control of Logista, which distributes products for Imperial and other tobacco makers in southern Europe, when it acquired Franco-Spanish business Altadis.
Logista also works for companies in the broader consumer goods sector as well as telecom operators, pharmaceutical companies and publishing houses, distributing their goods to about 300,000 "delivery points" including shops, petrol stations, pharmacies and hospitals, hotels and restaurants.
Imperial, the world's fourth-largest international tobacco group, said on Tuesday Altadis aims to sell a tranche of shares in Logista through an offer to certain institutional investors but Imperial will retain a majority stake, which some analysts found surprising.
Imperial's shares were up 0.4 percent at 2614 pence by 1148 GMT.
"This means that ... the asset-heavy business will continue to weigh on returns on capital and profitability," said Morningstar analysts in a research note.
"We expect Imperial to reduce its stake over time," they added.
Logista, which Morningstar estimates could be valued in the share sale at about 1.1 billion pounds ($1.9 billion), generates a low single-digit operating margin, whereas the tobacco business generates a margin north of 40 percent even as its revenue is slipping due to increasing regulation and fewer people smoking.
What is more, being in control of store delivery has less competitive value in tobacco than it does for other products like soft drinks, Morningstar said, since in-store displays are often heavily regulated. Imperial, whose brands include Davidoff and Gauloises cigarettes, Golden Virginia and Drum rolling tobacco and Cohiba Cuban cigars, had said in February it was considering listing shares in Logista.
RETURN TO MADRID MARKET
Logista, which was originally spun off from Tabacalera in 1999 when the Spanish tobacco group merged with its French counterpart SEITA to form Altadis, was still nearly 60 percent owned by Altadis when Imperial bought the Franco-Spanish group in 2008.
Immediately after the Altadis deal Imperial bought the rest of Logista in a mandatory cash offer for the remaining shares at a price of 52.50 euros a share, which valued the entire logistics firm at some 2.3 billion euros ($3 billion).
Since then, the company's turnover has risen 17 percent to about 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 a succession of local IPOs this year including eDreams Odigeo in April and Applus Services in May.Logista's chief executive, Luis Egido Galvez, said the group had maintained a solid operating performance in recent years despite a general decline in tobacco volumes and a weak economic environment in southern Europe.
His strategy is to further expand in sectors beyond tobacco, as well as improve operational efficiencies and introduce new services, he said.
Credit Suisse and Goldman Sachs are joint coordinators for the IPO and are joined by Morgan Stanley as joint book runners.
($1=0.5956 British pounds)
(With additional reporting by Robert Hetz in Madrid; Editing by David Goodman and Greg Mahlich)
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