Imperial Brands back in the spotlight

Imperial Brands was back in the spotlight on Wednesday after Exane BNP Paribas put just a 30 per cent chance on the tobacco maker being independent by the end of next year.

Exane added Imperial to its mergers and acquisitions target list. “The time is nigh” for Japan Tobacco to buy Imperial as it looks to cut reliance on the highly competitive Japanese, Russian and UK markets and deliver on an ambition to be the world’s biggest tobacco company ex-China, the broker said.

Japan Tobacco has said that litigation risk makes it wary of the US, where Imperial has a 10 per cent market share. But Imperial’s 2015 deal to buy brands from the Reynolds-Lorillard merger left legal risk with the sellers, meaning Imperial’s US business is mostly litigation free, Exane said.

Imperial closed 0.8 per cent higher at £37.85. A mixed wider market lifted the FTSE 100 by 0.4 per cent, up 27.42 points to 7,302.25.

Unilever gained 5.7 per cent to £37.91 after launching a review of its business, pledging to hit the higher end of profit targets. The stock finished just shy of Friday’s record-high close of £37.97, which came after Kraft Heinz made public its since-withdrawn $143bn bid approach.

Citigroup said it expected Unilever to “refocus on the categories where it can actually still generate sales growth while funding its investments via net revenue management, careful cost-cutting and a very selective milking of dominant positions . . . A clear path could be to become a household and personal care pure play and sell its food and refreshments business,” said the broker.

Diageo hit a record high, up 0.7 per cent to £22.92, awaiting news on an expected open offer to add to its majority stake in United Spirits of India.

A day after results, InterContinental Hotels faded 2.8 per cent to £37.70. Barclays downgraded InterContinental to “equal weight”, saying the shares are now fairly valued with limited short-term catalysts.

Aggregates maker CRH was 1 per cent lower at £27.86 after the Architecture Billings Index, a lead indicator for US construction activity, pointed to contraction in January.

Outsourcer Serco plunged 19.8 per cent to 118.5p after management pushed into next year the possibility that margins might stabilise. Sector peer Capita, which reassured on underlying trading a day earlier, bounced 4.6 per cent to 558.5p.

Indivior slipped 6.6 per cent to 345.2p after tweaking its guidance on US antitrust litigation to say the final cost could be “materially higher” than provisions, rather than “materially different”. The heroin substitute maker also edged 2017 net income guidance lower to reflect launch costs and a “complex” ramp-up for its monthly addiction treatment, RBP-6000.