Imperial Tobacco Group PLC has a 6.3 percent rise in full-year profits but its acquisition of Spain's Altadis SA will be delayed until next year.
Imperial said its 12.6 billion EUR(US$18.2 billion) takeover of Altadis, the maker of Gauloises and Gitanes cigarettes, is now not expected to be completed until January because of new takeover rules in Spain. It had expected to close the deal by the end of this year.
Imperial, which makes Davidoff cigarettes, Golden Virginia loose tobacco and Rizla rolling papers, reported net profit of 912 million pounds (1.3 billion EUR; US$1.88 billion) for the year ended Sept. 30, compared with 858 million pounds in the previous 12 months. Sales gained 5.7 percent to 12.33 billion pounds (17.6 billion EUR; US$25.4 billion).
Cigarette volume rose 7 percent to 200 billion, boosted by a six-month contribution from the acquisition of Commonwealth Brands, the fourth-largest cigarette producer in the United States with discount brands including USA Gold and Sonoma.
"The performance of Commonwealth Brands is particularly pleasing, with an excellent return on investment in the first six months," said Chief Executive Gareth Davis.
Imperial also acquired a controlling interest in Tremaco, a tobacco distribution business based in Estonia, during the year.
Davis said the delay to the Altadis deal, following the change to Spanish takeover laws in August, was frustrating but added that approval from the Spanish regulators was "just a matter of time ... it's pretty imminent."
Once that is received, Altadis will hold a shareholder meeting to approve the deal, which has already received clearance from U.S. and European regulators, providing that some small disposals be made in Europe.
Davis dismissed suggestions that the delay could leave the door open for a rival bidder - Altadis recommended Imperial's 50 EUR(US$72.12) per share bid to shareholders in July "in the absence of a competing offer at a higher price."
"You never say never, but I think it's unlikely," Davis said.
Turmoil on debt markets in recent months could prohibit another buyer from coming forward. Imperial put its financing in place in July, before the recent turbulence, and said the delay would have no financial impact.
The company's shares lifted 0.2 percent to 2,447 pence (US$50.59; 35.11 EUR) on the London Stock Exchange.
"Imperial Tobacco's full-year results were almost exactly in line with our expectations, and the shares have experienced mild profit-taking after a good run," said analyst Jeremy Batstone-Carr of Charles Stanley in London.
Evolution Securities analyst Andrew Darke said the delay in the Altadis deal was "a little disappointing," but said he remains confident it will go ahead.
The acquisition will consolidate Imperial's position as the world's fourth-largest tobacco company behind Altria, British American Tobacco and Japan Tobacco. It will also push Imperial into the second position in Europe behind Altria.
The European tobacco industry has been consolidating recently, with multinationals buying each other to obtain economies of scale as cigarette sales decline in Western European markets amid smoking bans. Britain - a key market for Imperial - banned smoking in enclosed public spaces, including restaurants and pubs, on July 1.