British American Tobacco’s chief executive has called the idea of moving its listing from London to New York a “distraction” after learning that one of the company’s top-10 shareholders who had pushed for this change left his position.
Tadeu marroco said that a listing change “would cause a lot internal distraction” and was “not certain the benefit would as obvious as some suggest”.
Rajiv Jain – the chair and chief investment office of GQG Partners , a $105bn US investment company – urged BAT last year to change its primary listing, and clashed over its decision not to resume its share buyback program.
Jain’s argument centered on the fact GQG owns a stake at Philip Morris International.
Two people who are familiar with the facts say that GQG, a company which, at its peak, owned 4% of BAT shares, sold its stock in the company in July of last year. They were frustrated by the refusal of GQG to relocate and to take advantage of larger pools of capital, especially for tobacco stocks, in the US. The European tobacco industry is a very small part of the investment market due to the fact that the majority of capital in Europe is invested within the frameworks of environmental, social, and governance.
Marroco was asked if there would be a listing change during his tenure which began almost a year earlier. He replied: “I do not think that we should focus on this at this time.”
He said that he had “many more things” to do. These included working on revenue in the US, and developing new products. “There’s nothing to suggest this. . . It’s a no brainer to go to the US.”
He acknowledged London’s capital market was struggling to retain and attract listings, but highlighted the benefits to investors in staying in the UK. CRH building materials, Smurfit Kappa packaging and Flutter gambling are among those who have moved their primary listing to the US.
Marroco explained that if you own shares in a UK-listed company and are outside the country, you do not pay withholding taxes on your dividends. This is different than what happens in the US.
He said: “I hope we can see in 10 years that we won’t be having this type of conversation.” “Today, there is a lot emotion surrounding it due to the frustrations of those who are leaving.”
Investors are attracted to tobacco stocks by the capital gains from dividends and stock buybacks. Spring Mountain Investments is BAT’s most active investor. It’s the investment vehicle owned by Cayman Islands billionaire Kenneth Dart. He’s the heir of the world’s leading manufacturer of foam cups.
BAT announced in this month that it would restart its share-buyback program, starting with £700mn this year. The proceeds from a £1.7bn small sale of its stake will be used to buy back a portion of the company’s shares .
Marroco said, “It’s important to me that after restarting the buyback program, it should become a regular feature of our capital allocation.”
BAT is facing a challenge in reversing the decline of cigarette sales on its largest market, the US. The company is behind PMI in this area because people are switching to cheaper brands or cigarette alternatives.
BAT aims to generate 50% of its revenue from alternative products such as Vuse vapes, Glo heated tobacco devices and other similar products by 2035.
Marroco acknowledged that BAT “was late to the category” for heated tobacco products, but claimed the company would catch up due to its US market share. We have a huge business in the US which we can use to market [new products].