(Bloomberg) — British American Tobacco Plc, the maker of Lucky Strike cigarettes, plans to sell as much as $2.1 billion of shares in Indian partner ITC Ltd. in a move that will help it return cash to shareholders and invest in its business.
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London-listed BAT is offering 436.9 million shares at 384 rupees to 400.25 rupees each in a block trade, according to terms seen by Bloomberg. That’s a discount of as much as 5% from Tuesday’s closing price for ITC.
BAT said it will use cash raised from the ITC sale — first revealed in a Bloomberg News report from Monday — to buy back an initial £700 million ($895 million) of its own shares in a program running until the end of 2025.
The company has been under pressure to return more cash to shareholders. It recently took a write down of more than £27 billion on the value of its US cigarette brands as more smokers give up the habit quicker than expected with some switching to alternatives such as vapes, nicotine pouches and heated tobacco sticks.
Shares of BAT were up 2.85% to 2,385p at 12:25 a.m. in London. ITC shares fell 1.2% to close at 404.45 rupees. Bank of America Corp. and Citigroup Inc. are arranging the sale.
Cash return
BAT said that alongside a new buyback program it will also continue to use operating cash flow to further lower debt and fund investment in its business. BAT has already made significant investments in research and development of alternative nicotine products, including Vuse vapes and Velo nicotine pouches, that it says are less harmful than cigarettes.
The Indian conglomerate ITC is the country’s biggest cigarette maker but also runs a variety of other businesses including food products and packaging. It has a hotel division that it’s in the process of spinning off.
BAT owns about 29% of the Mumbai-listed ITC, according to data compiled by Bloomberg, and has owned a stake in the company for more than 100 years.
BAT had previously said it was focused on completing the regulatory processes required to allow it to monetize part of its stake in ITC. In February, Chief Executive Officer Tadeu Marroco told investors any stake sale would come as BAT looks for better balance sheet flexibility.
Read More: BAT in Biggest Gain Since 2020 on Plan to Sell Stake in ITC
Keeping its stake in ITC above 25% will allow BAT to keep two seats on the Indian company’s board.
–With assistance from Julia Fioretti, Andy Hoffman, Dinesh Nair and P R Sanjai.
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