British American Tobacco is facing pressure to move its primary listing to New York after a top-five shareholder said it “makes no sense” for the cigarette maker to remain on the UK stock market.
Rajiv Jain, founder of $92bn US-based investment firm GQG Partners, told the Financial Times he had urged the management of the FTSE 100-listed owner of Lucky Strike and Dunhill to call time on a London listing that dates back to 1912.
BAT is an “orphan in Europe”, said Jain, who this month ploughed $1.9bn into four Adani Group companies after the Indian conglomerate was hit by a short seller attack. “The core ownership base [of BAT] has disappeared. It makes no sense for them to remain there.”
He pointed to the US-centric nature of the FTSE 100 company’s business and the valuation gap between BAT and its US-listed peer Philip Morris International, where GQG is a top-10 shareholder, asking: “What’s the point of remaining listed in London?”
The lure of higher valuations and a deeper pool of investors in the US have sparked a string of departures from London. This month Cambridge-based chip designer Arm rejected a UK listing in favour of New York while CRH, the world’s biggest building materials company, became the latest business to seek an exit from London.
They followed in the footsteps of the world’s biggest gambling group, Flutter, whose shareholders will vote on a secondary US listing in April, with an eye to possibly switching its primary listing. Shell also considered switching to a New York listing, the FT reported last month, although it ultimately chose a single listing in London.
The widening debate on the merits of leaving the London market underlines the UK’s difficulty in attracting and retaining companies, and reflects how a domestic investor base has increasingly shunned its home equity market. Holdings of UK-listed companies by British pension and insurance funds have plunged from about half their portfolios to just 4 per cent over the past two decades, according to data from advisory firm Ondra.
The US accounted for about two-fifths of BAT’s £27.6bn in global revenues last year on a constant currency basis, making it the cigarette maker’s biggest market. BAT’s US subsidiary Reynolds owns the popular Newport and Camel cigarette brands, while BAT’s Vuse vape has a 41 per cent market share in the e-cigarette category, according to Nielsen data.
Despite generating slightly higher revenues and operating profits than Marlboro maker PMI last year, BAT’s valuation lags far behind its New York-listed rival. On Wednesday afternoon BAT’s market capitalisation stood at £66.3bn, less than half PMI’s £147.6bn.
Jain, who founded Australia-listed GQG in 2016, declined to go into detail about how BAT’s management reacted to its fifth-biggest shareholder’s proposal.
However, he said “we are a large shareholder, so they listened to us and they weren’t committal in one way or the other”.
BAT has a secondary listing on the Johannesburg Stock Exchange.
A BAT spokesperson said the company “does not comment on its engagement with shareholders”.