Imperial's 4.9 bln pound cash call weighs on shares

By David Jones

LONDON (Reuters) - Imperial Tobacco, the world's No. 4 cigarette group, launched a deeply discounted 4.9 billion pound rights issue on Tuesday to pay for Altadis with the size of the cash call depressing its shares.

The maker of Lambert & Butler cigarettes set its planned cash call close to the top of analysts' expectations and just below Imperial's upper limit of 5 billion pounds as the group reported its half-year earnings rose 18 percent.

Analysts said the hefty size of the rights issue reflected the strength of the euro against the pound and also Imperial's decision to buy in Altadis's minority stake in Logista rather than sell the logistics business.

The size and resultant larger dilutive effect helped push Imperial's shares down 2.8 percent to 25.46 pounds, having hit 25.03 pound, compared to the FTSE 100's 1 percent loss.

"The absolute size of 4.9 billion pounds is 9 percent greater that our estimates and on a back of envelope basis implies an approximate 2 percent decrease in our 2008 EPS estimate and an approximate 6-7 percent decrease to our 2009 EPS," said JP Morgan analyst Erik Bloomquist.

The cash call is fully underwritten by Hoare Govett, Morgan Stanley, Citi and Lehman Brothers and offers one new share for every two existing ones at 14.75 pounds, or a 43.1 percent discount to Monday's closing price of 26.18 pounds. The operation will cost Imperial 93 million pounds.

It will be the UK's third biggest rights issue after the Royal Bank of Scotland's 12 billion pound issue announced in April and BT's 5.9 billion pound cash call launched in 2001.

Recent rights issues, including Royal Bank of Scotland's and Carlsberg's $6.3 billion (3.2 billion pound) cash calls earlier this month, have been launched at sharply discounted prices to guarantee success in current tough market conditions.