Two private equity firms, CVC Capital Partners Ltd and PAI Partners, offered € 12.8 billion (US$ 17.4 billion) for Altadis SA, the Spanish maker of Gauloises cigarettes, topping a bid from Imperial Tobacco Group Plc.

The buyout firms offered  € 50 a share in cash, Altadis said on Friday in a regulatory filing. In April the Madrid-based company rejected an increased bid of € 47 from Imperial Tobacco. Altadis said its board will meet in "the next few days” to discuss the new proposal.
The Spanish company sells one in four cigars worldwide and also owns the largest tobacco distributors in Spain, Italy and Morocco. A purchase of Altadis would be the largest of a tobacco company in Europe. Analysts said on Friday that the bid by the two private equity firms could spur a higher bid from Imperial, or prompt the company to team with the private equity groups and start a joint bid. That would probably result in Altadis’s being split up, analysts said, since the private equity companies would be interested in Altadis’s logistics business and Imperial in its cigarette and cigar operations.
The private equity firms' bid for Altadis needs the agreement of the cigarette maker's board and requires an examination of its books. The offer also depends on the bidder gaining 75 per cent of the stock and obtaining the necessary funds. Should the plan succeed, it would be the biggest leveraged buyout in the tobacco industry since Kohlberg Kravis Roberts & Co.'s record US$ 31 billion takeover of RJR Nabisco Inc. in 1989 according to data compiled by Bloomberg.
Buyout firms, who typically take on debt to buy companies with strong cash flows, have been seeking takeover targets in Europe. CVC abandoned plans for a 10 billion-pound bid for UK supermarket chain J Sainsbury Plc on April 11. CVC has worked with PAI Partners in Spain before: together with London-based Permira Advisers LLP, the firms bought clothing retailer Cortefiel SA for € 1.44 billion in 2005. CVC owns Colomer Group, a Spanish maker of cosmetics and beauty products whose chairman, Carlos Colomer, sits on Altadis's board.