British American Tobacco sells £1.11bn stake in India's ITC

British American Tobacco has sold a stake in Indian consumer goods company ITC for £1.11 billion at 413 rupees per share. The company sold 313 million shares, representing 2.5 per cent of ITC, exceeding its initial plan to sell up to 290 million shares valued at about £1.03bn.

Following the sale, ITC shares fell by 1.15 per cent to trade at 421.15 rupees apiece on the NSE.

British American Tobacco (BAT), through its arm Tobacco Manufacturers (India) Ltd, sold the stake in Kolkata-based ITC.

Before this sale, BAT through its affiliates – Rothmans International Enterprises, Myddleton Investment Company and Tobacco Manufacturers (India) Ltd – held a combined 25.44 per cent stake in ITC Ltd.

After the completion of the block trade, BAT will remain a significant shareholder of ITC, holding less than 23 per cent of the company.

As per the latest block deal, up to 313 million equity shares of ITC were sold at 413 rupees per share, a discount of about 4.8 per cent to ITC’s closing price of 433.90 rupees on the NSE on Tuesday, according to a revised term sheet seen by PTI.

Goldman Sachs (India) Securities Pvt Ltd and Citigroup Global Markets India were the placement agents for the transaction, sources said.

The number of shares was increased from the earlier 290 million mentioned in the initial term sheet. The sources said 313 million shares amount to about 2.5 per cent stake in ITC, and the offer size, based on the final price, is pegged at £1.11bn or about 12,927 crore rupees (£1.11bn).

The shares were sold through multiple tranches on the BSE and NSE under the bulk sale route. The transaction is entirely secondary in nature, meaning ITC will not receive any proceeds from the deal, and the stake is being sold by Tobacco Manufacturers (India) Ltd. The seller and its affiliates will be subject to a lock-up period of six months following the sale.

In a regulatory filing on the London Stock Exchange, BAT Plc on Tuesday said its wholly-owned subsidiary Tobacco Manufacturers (India) Ltd intended to sell stakes in ITC Ltd.

The transaction will provide BAT with increased financial flexibility as it delivers on its commitment to invest in transformation, reduce debt and ensure sustainable shareholder returns.

BAT's initial investment in ITC dates back to the early 1900s, and the two companies have a longstanding relationship.

“ITC is a valued associate of BAT in an attractive geography with long-term growth potential where BAT benefits from exposure to the world's most populous market.

“Whilst this transaction supports delivery on our commitments to BAT shareholders, we continue to view ITC as a core strategic component of our global footprint as we partner on business opportunities in India. I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders,” BAT’s chief executive Tadeu Marroco said.

In March 2024, BAT Plc sold a 3.5 per cent stake in ITC Ltd for 17,485 crore rupees (approximately £1.52bn).

BAT is in the multi-category consumer goods business. Its portfolio includes global cigarette brands and a growing range of nicotine and smokeless tobacco products, including vapour brand Vuse, heated product brand ‘glo’ and Velo, a modern oral nicotine pouch brand.

(With inputs from agencies)