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    Altadis Rejects Imperial Offer

    Board says bid doesn't reflect the company's strategic value, future growth prospects.

    MADRID -- Altadis SA announced that its board, in conjunction with its financial and legal advisors, has carefully considered Imperial Tobacco's offer and has unanimously rejected it, on the grounds that it doesn't reflect the strategic value of the company its unique and diversified assets, as well as the future growth prospects.

    As previously reported by CSNews Online, the Spanish-French tobacco company received an unsolicited approach from U.K.-based Imperial Tobacco Group PLC, in the latest signal that the global tobacco industry is poised for dramatic consolidation.

    The preliminary offer of EUR 45.00 ($59.53) per Altadis share valued the manufacturer of the Gitanes and Ducados brands at EUR 11.5 billion ($15.30 billion).

    According to an anonymous source cited by Reuters, Altadis has hired three investment banks -- Rothschild, Credit Suisse and JP Morgan -- to advise it on its options. "They haven't been hired to find another bidder because Altadis has its own business plan," the source said, adding the advisers would look at how to extract more value from the firm.

    Imperial has said it wants to continue talks on a friendly basis, but analysts have said the British tobacco company could go hostile and approach Altadis shareholders directly.

    Imperial makes Lambert & Butler and JPS cigarettes, as well as Rizla rolling papers. Last month, it agreed to buy Commonwealth Brands, the U.S.'s fourth-largest tobacco company, for $1.9 billion in cash.

    In the meantime, analysts and media have speculated on alternative bids. Some see Altadis teaming up with Philip Morris owner Altria to make a counterbid for Imperial, but the source said Altadis had poured cold water on that option.

    "Even together with a partner, it would require Altadis to raise too much debt, so it has been ruled out," the source told Reuters.

    Spanish newspaper Expansion reported that Altadis management could consider teaming up with a private-equity group to launch their own buyout-bid for Altadis, while El Economista reported U.S. private-equity group KKR was also looking at an offer. Altadis declined to comment on any of those scenarios.

    Altadis has been seen as an attractive target for private-equity firms as its three-pronged business of cigarettes, cigars and distribution makes it a prime candidate for a break-up, with any buyer selling off individual units at a profit, Reuters said.

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