Wednesday March 14 was national no-smoking day and, with due reverence to the event, it was the day that Gareth Davis, the chain-smoking chief executive of Imperial Tobacco, chose to deliver his €14 billion bid for Altadis, the Spanish cigarette and cigar group.

Imperial’s bid is long-awaited. Mr Davis is known to have been in touch with the Altadis executives for years, courting them assiduously for months. Indeed, reports of his conversations in Spain helped to prompt Gallaher into doing a deal with Japan Tobacco, fearing that it would miss out on what looks set to be a crucial round of consolidation in the smoking industry. And once JT bid for Gallaher, the pressure on Imps to make a move on Altadis became all the greater: the Gallaher/JT deal reduces the number of global tobacco companies from six to five. Competition authorities may allow just one more mega-merger. This is looking like the last gasp for M&A in the tobacco sector.

An Imperial-Altadis deal is also logical. The company wants Altadis’s extraordinary stable of brands, ranging from Gauloises Blondes to Cohiba and Montecristo. It would also like geographical reach into markets where it is underrepresented: France, Spain and Morocco.

But Imperial, a £14 billion company, is stretching itself to buy Altadis. The price is high – and could well get higher. Imperial’s offer values Altadis at a marginally higher multiple than JT valued Gallaher. It is a cash bid, which will force Imperial into one of the biggest rights issues in the history of the City.

Notwithstanding the fact that Imperial has put in long months wooing Altadis and, therefore, avoided any hint that its unsolicited bid is hostile, it still has to get a recommendation for its offer. The Spanish group is free to solicit other interest. Inevitably, it will explore the idea of a Pac-Man defence, looking into the possibility of turning on its acquirer and trying to acquire it.

Certainly, there are other interested trade buyers. Paul Adams, BAT’s chief executive, has lunched with Altadis and, while he may balk at the price, he is known to covet the business. Altria, the US tobacco company that owns the Marlboro brand, is still toying with its own internal restructuring, but its international business would welcome a greater exposure both to the Mediterranean and Havana cigars.

Imperial’s is just the first offer. The premium is modest. The price does not reflect either the looming presence of other buyers for Altadis or the scarcity of such assets. The tobacco industry may have entered into its final round of global consolidation, but in the battle for Altadis, this is not the beginning of the end, but the end of the beginning . . .

The Pru’s plan for prosperity

New corporate strategies have a tendency to evoke disbelief or disappointment. Prudential is the exception. The programme Mark Tucker unveiled yesterday is both credible and impressive.

Staying in the UK is the right decision. Quitting its home territory, the source of nine tenths of its history, would have taken realism to the point of defeatism. Staying is not, however, an exercise in nostalgia. After slimming the UK operation down to lines such as annuities, in which the Pru has a big market share or competitive advantage, and after tackling the potential distribution of orphan assets, the business should be worth much more to shareholders in cashflow and rising dividends than a quick sale would yield.

There will still be a culture shock. The Pru will no longer worry middle-aged dads into starting personal pension plans. It will sell only to companies. If you want it to manage your money, however, the Pru’s successful, fast-growing M&G subsidiary is eager to oblige. And Equitable customers should benefit from their with-profits annuities being taken on by the Pru, which has both the management resources and the expertise in mortality to manage the risk. There will be nastier shocks for employees, mainly in the UK, as the group strives to save £195 million a year within three years, a challenging target.

Viewed in this context, the Egg debacle becomes just a matter of timing. It should have been sold earlier before it became a serious drain.

The Pru’s strategy is a plan for prosperity, not a reaction to crisis. Its latest results are impressive on their own, with profits up 15 per cent to £1.98 billion on the strength of the rapidly growing Asian life business. And Mr Tucker has the sense to offer higher dividends, a welcome change from his predecessor.

Half-baked

Marc Bolland, the new chief executive of Morrison, has completed a sweeping review of the company and come up with a plan to reposition the business as a “food specialist for everyone”. In other words, as a supermarket.

This is not the only thing that is half-baked about the Bolland plan. The company has announced its intention to rebrand, but has not come up with either a new logo or slogan. Instead, it has left customers with one less reason to shop at Morrison: an admission that its image is tired and failing.

The £110 million worth of newfound enthusiasm for IT systems is embarrassing for Morrison, which junked so much of Safeway’s new IT when it bought the company. And the conservative approach to the £6 billion property portfolio will disappoint investors looking for Morrison to exploit its assets.

But Mr Bolland is addressing the right issues. The most important challenge facing the company is its brand. He is squarely focused on transforming the image, moving it away from its reputation for cheap staples and to making it a more affordable version of Waitrose.

To do this, Mr Bolland is playing to Morrison’s peculiarities, namely its in-house supply chain of abattoirs and packhouses and bakeries. Morrison is well behind on online retailing and carbon-neutral initiatives and ethical consumerism, but it has the opportunity to be the supermarket that cares about food miles. It has the chance to rebrand itself as a place where food is homegrown and healthy.

This, of course, would have been a better pledge than Mr Bolland’s pithy promise to turn Morrison into a shop where you can buy food.

– The centrepiece of F&C’s turnaround plan is a target to boost profits by 50 per cent between 2007 and 2009. Note the base date for this hurdle growth rate. It’s in the future. The worse the company does in 2007, the easier it will be to meet its target. F&C has a good story to tell in its improving investment record. But it has more to learn in setting itself rigorous goals.

james.harding@thetimes.co.uk

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