Gallaher takeover talk boosts tobacco shares

Tobacco shares were ignited today by speculation over a takeover battle for Gallaher, which owns the brands Benson & Hedges and Silk Cut.

UK-based Gallaher, which employs 12,000 people worldwide, said last night it was the subject of bid interest, but did not name the party.

Reports today said the approach came from Japan Tobacco, which is the world’s third biggest tobacco company and a former state-owned monopoly.

Shares in Gallaher jumped 21% as the Financial Times newspaper said the interest from Japan Tobacco was expected to trigger a counter-bid, most likely from Philip Morris. Today’s share price rise took the market value of Gallaher to more than £7.7bn (€11.4bn).

Imperial Tobacco and British American Tobacco – the London market’s other listed tobacco companies – were up 7% and 3% respectively as investors eyed the prospect of consolidation in the sector.

Gallaher makes cigarettes for the UK market at Lisnafillan in the North, where it also produces Virginia-blended cigarettes for export. All the group’s cigar brands are produced at Gallaher’s UK cigar factory, JR Freeman, in Cardiff.

The company’s roots date back to 1857 when Tom Gallaher started a business making Irish roll tobacco in Derry.

Today, Gallaher is the fifth largest international tobacco company in the world and the fourth biggest in Europe.