ITC Block Deal: The British American Tobacco (BAT) is preparing to sell a stake in Diversified Business Group ITC Limited on BAT. BAT, a UK multinational company making cigarettes, tobacco and electronic cigarettes, is currently the largest shareholder in the ITC. This time it is going to reduce about 2.3% stake in ITC through a block deal.
BAT gave this information in a formal revelation. Earlier in March 2024, BAT sold 3.5% stake in ITC Limited for about 2.1 billion dollars. This was the third largest block deal in India so far. ITC’s business extends to cigarette, hotel and fast moving consumer goods (FMCG).
Block deal size and banker?
“CITI and Goldman Sachs are handling this deal,” a source associated with the industry told Moneycontrol. According to another source, “The floor price of the deal has been fixed at ₹ 400 per share. Accordingly, the total size of the block deal will be around ₹ 1.36 billion (about ₹ 11,300 crore). ”Both sources gave this information on the condition of not revealing the name.
Why BAT has to sell stake?
BAT said that this deal will help the company to strengthen its financial position, reduce debt and give better returns to shareholders. Also, the amount received from the block deal will also be used to increase the company’s share buyback program to £ 200 million to £ 1.1 billion.
BAT’s old relationship with ITC
BAT’s investment in ITC was in the early 1900s. There has been a commercial partnership between the two companies for a long time. Even after the BAT block deal, a large shareholder will remain with 23.1% stake in ITC.
BAT’s CEO Tadeu Maroko said, “ITC is our strategic partner in big and emerging markets like India. We will continue to consider it an important part of our global network even after this stake sales.”
In the earning call of February 2024, CEO Maroko said that having a 25% stake in a company in India gives special rights, but BAT has more than 29% stake. In such a situation, they have scope to reduce it.
Also share in ITC Hotels
The BAT also had an ITC’s recently demarcated hotel business (ITC Hotels) of about 15% till December 2024.
ITC shares closed down 2.01% on 27 May at 433.90. ITC shares have given a return of 4.64% in the last one year. However, this year i.e. in 2025, shares have fallen by 6.69% so far.
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