BAT eyes 2.3% stake sale in ITC via $1.36 billion block deal

Investment banks Citi and Goldman Sachs are working on the proposed fresh block trade, sources said.

London-headquartered British American Tobacco ( BAT), the largest shareholder in ITC Ltd is gearing up to sell part stake again in the diversified conglomerate via the block deal route and intends to dilute 2.3 percent stake this time , the firm said in a disclosure.

"Investment banks Citi and Goldman Sachs are working on the proposed transaction," an industry source told Moneycontrol. "At the floor price of Rs 400/share, the size of the block deal is around 1.36 billion," another source added.

Both spoke to Moneycontrol on the condition of anonymity.

According to the disclosure, the transaction will provide BAT with increased financial flexibility as it delivers on its commitment to invest in transformation, deleverage and sustainable shareholder returns. Proceeds will be used to progress to within the target 2-2.5x adjusted net debt/adjusted EBITDA leverage corridor (adjusted for Canada) by the end of 2026 and to continue our sustainable buyback program by enabling an intended £200 million increase in the share buyback to a total of £1.1 billion in 2025.

BAT's initial investment in ITC dates back to the early 1900s and the two companies have a longstanding, mutually beneficial relationship. As one of India's leading FMCG enterprises, ITC has delivered significant value for its shareholders. Following completion of the proposed Block Trade, BAT will remain a significant shareholder of ITC, with a c.23.1 per cent holding, the announcement added.

Tadeu Marroco, chief executive of BAT, said "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."

“Local regulations require us to keep our stake at 25 percent to have veto rights. Our current stake is above 29 percent so there is space for us to reduce stake,” Tadeu Marroco, CEO of BAT told analysts in a post earnings call in February 2024.

The following month BAT sold 436.9 million shares, or roughly 3.5 percent stake in ITC Ltd for about $2.1 billion in what was India's third-largest block deal ever.

Incidentally, British American Tobacco also holds around 15 percent stake in ITC Hotels, the demerged entity, as of December 2024.

When contacted, Citi declined to comment. An immediate response could not be elicited from Goldman Sachs. An email query sent to BAT followed by reminders from Moneycontrol remained unanswered at the time of publishing this article.

At the end of day's trade on May 27 , the ITC ltd share ended down 2.01 per cent.