Takeover talks boost Gallaher

By THIS IS MONEY
Updated: 18:00 EST, 27 March 2000

Shares in tobacco company Gallaher Group touched four-month highs on Tuesday after a newspaper article suggested the firm might be taken over by larger rival British American Tobacco.

The stock slipped from early session gains of more than 12% by 1333, trading at 307- 3/4 pence for a rise of 7.8% or 22- 1/2p on modest volume of 1.4 million shares.

Dealing flow came after The Times newspaper featured the stock as its 'rumour of the day', suggesting a possible takeover bid by BAT in a move the paper said would fill a hole in BAT's operations if U.S. rival Philip Morris succeeded in dissolving a distribution aggreement with Rothmans. BAT already owns Rothmans.

The company's head of investor relations, Ralph Edmondson, told Reuters his company did not comment on rumours, a response echoed by a spokeswoman for Gallaher.

One London-based tobacco analyst, who asked not to be named, expressed surprise at the share price rise on what he described as a well-worn story. But he added that the Rothmans issue could be a factor fuelling interest.

Philip Morris has asked a British court to rule if BAT's acquisition of Rothmans last year gives it grounds to break the distribution agreement.

HSBC tobacco analyst Nick Bunker said people were putting too much emphasis on the Rothmans issue at a time when U.S. litigation was far more important to BAT. 'I think people are getting ahead of themselves on this one. If there were really something in it almost certainly the companies would have had to make a statement,' he said. © Reuters