British American Tobacco Initiates Stake Sale in ITC, Holding 25.5% Post-Deal

London-based British American Tobacco Plc has decided to kick off a substantial stake sale in Indian conglomerate ITC, showcasing its intent to divest a 3.5% shareholding, equivalent to around $2.1 billion, through a block trade to institutional investors. This move by the renowned makers of Lucky Strike cigarettes involves offering a total of 436.9 million shares at prices ranging from Rs 384 to Rs 400.25 per share, totaling a transaction value of Rs 16,775 crore, according to a report by Reuters. The sale, set at a discount of up to 5% from ITC’s closing price on the preceding day, will diminish British American Tobacco’s ownership in ITC from about 29% to an estimated 25.5%.

The planned offloading comprises the sale of 43.69 crore ordinary shares in ITC through a block trade, a move that will see the Dunhill cigarette producer’s stake in ITC reduced to approximately 25.5%, marking a shift from its previous level of close to 29%, as outlined in a CNBC Awaaz report. A specified lock-in period of 180 days has been imposed on British American Tobacco to regulate any potential additional stake sales in ITC in the near future.

Furthermore, BAT’s wholly owned subsidiary Tobacco Manufacturers (India) Limited aims to divest 43.68 crore shares of ITC to institutional investors via an accelerated bookbuild process, subject to customary closure conditions. British American Tobacco is preparing to repurchase shares until December 2025, displaying a commitment to sustaining its stake in ITC. BAT’s CEO, Tadeu Marroco, expressed optimism and emphasized the company’s eagerness to preserve its significant shareholding in ITC as the latter progresses on its path of expansion.

Previously announced, the anticipated proceeds from the stake sale in ITC are designated for the repurchase of British American Tobacco shares over the course of a buyback program extending until December 2025, with an approximate allocation of £700 million earmarked for the current fiscal year. BAT, positioned as the largest individual shareholder of ITC, has enlisted the Wall Street investment banks Bank of America and Citigroup to oversee the share sale mechanism.

British American Tobacco has recently articulated that maintaining a 25% stake in ITC would be adequate to retain a strategic influence, inclusive of veto rights, within the company. Owing to a notable downturn in cigarette volumes across its primary markets, BAT finds itself grappling with challenging circumstances, underscored by a net debt standing at $40 billion, approximately three times the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA), and representing close to 60% of its market capitalization.

In the stock market scenario, ITC Ltd concluded trading on the prior day at Rs 404.25, registering a decrement of 1.26%.