LONDON: Imperial Tobacco Group plans to list its European logistics division Logista on the Spanish stock market, the British company said on Tuesday.
Logista is a leading distributor for Imperial's Franco-Spanish subsidiary Altadis and other tobacco companies in southern Europe but also works for companies in the broader consumer goods sector as well as telecom operators, pharmaceutical companies and publishing houses in serving about 300,000 delivery points including petrol stations, hospitals and restaurants.
Imperial, the world's fourth-largest international tobacco group said on Tuesday Altadis would sell a tranche of shares in Logista to institutional investors in an initial public offer and keep a majority stake, which some analysts found surprising.
"This means that ... the asset-heavy business will continue to weigh on returns on capital and profitability," said Morningstar analysts in a research note.
"We expect Imperial to reduce its stake over time."
The logistics business, which Morningstar estimates could be worth about 1.1 billion pounds ($1.9 billion), generates a low single-digit operating margin, whereas the tobacco business generates a margin north of 40 percent even as its revenue is slipping due to increasing regulation and fewer people smoking.
What is more, being in control of store delivery has less competitive value in tobacco than it does for other products like soft drinks, Morningstar said, since in-store displays are often heavily regulated.
Imperial, known for its Davidoff cigarettes, in February said it was considering listing shares in Logista, which it acquired through its acquisition in 2007 of Franco-Spanish group Altadis, the maker of Gauloises cigarettes and Cohiba cigars.
Imperial's shares were up 0.7 percent at 2622 pence by 0953 GMT.
Logista's chief executive, Luis Egido Galvez, said the group had maintained a solid operating performance in recent years despite a general decline in tobacco volumes and a weak economic environment in southern Europe.
His strategy is to further expand in sectors beyond tobacco, as well as improve operational efficiencies and introduce new services, he said.
Adjusted operating profit for the business in the six months to March 31 declined by 1 percent to 73 million pounds ($123 million).
Credit Suisse and Goldman Sachs are joint coordinators for the IPO and are joined by Morgan Stanley as joint book runners.
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