Mar­ket clearly not con­cerned

Finweek English Edition - - Marketplace -

For all my con­cerns around leg­isla­tive risk with to­bacco com­pa­nies, Bri­tish Amer­i­can To­bacco (BAT) raised a mas­sive $17.25bn bond for the pur­chase of Reynolds. Clearly the mar­ket does not share my con­cerns. The rea­son is that while the com­pany is be­ing squeezed in de­vel­oped mar­kets such as the US, it is sell­ing more pre­mium brands and mov­ing east­wards to African and Asian mar­kets where leg­isla­tive risk is lower. That said, these coun­tries will even­tu­ally start crack­ing down on smok­ing, but BAT has a win­dow to make some profit in the mean­time. As a last point, some of these bonds ex­pire in 2047, in other words a 30-year bond! This in­di­cates that at least some peo­ple are not wor­ried at all about the next 30 years of the BAT busi­ness model. Still, I con­tinue to avoid to­bacco stocks. (Also see page 20.)

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.