British American Tobacco (BAT) has launched its share buyback scheme, following its announcement last week, funded by the recent partial sale of its stake in Indian business ITC.
The Lucky Strike cigarette maker, which is trying to shift away from cigarettes, sold a portion of its shares in ITC last week and generated proceeds of £1.57bn after costs from the sale.
BAT plans to repurchase £1.6bn worth of its ordinary shares using capital from the sale, with £700m slated for 2024 and the remaining £900m to follow in 2025.
The main goal of the buyback is to decrease the company’s issued share capital, meaning any shares bought through the programme will be cancelled.
Investment bank UBS will act as the initial purchaser of BAT’s ordinary shares, with BAT buying them back from UBS.
The London listed firm has shareholder approval to repurchase 223,590,721 shares. The buyback will begin on Monday and is scheduled to complete by 31 December 2025.
Last Tuesday, the tobacco giant announced a proposed sale of up to £436.8m worth of ITC shares to institutional investors through block trades. The sale will represent about 3.5 per cent of ITC’s total shares.
British American Tobacco previously held a roughly 29 per cent stake in conglomerate ITC but reduced it to around 25.5 per cent, just above the threshold required to keep board seats and veto rights.
The company has recently been under pressure to boost its flagging share price after it wrote down the value of its US business by £25bn last year. BATS informed the market in December it would take the charge after ‘macro-economic headwinds’ had forced it to reassess the 30-year value of its brands.
At the time, BATS said it’s now focused on delivering fewer but bigger “operational priorities” and driving a more collaborative and inclusive culture as it looks to become a “more agile and modern BAT”.