Shares in Imperial Tobacco tumbled yesterday amid fears that the turbulence in global credit markets could force the group to pursue a bigger rights issue to finance its £8.5 billion takeover of Altadis, of Spain, the owner of the Gitanes and Gauloises cigarette brands.

In a research note to clients, Citigroup said that Imperial could face a drop in earnings per share of up to 5 per cent if it was forced into such a move. Adam Spielman, a Citigroup analyst, wrote that this month’s credit crunch was likely to have a “material impact” on Imperial’s plans to buy Altadis, which were finalised on July 18 and approved by shareholders last week.

Mr Spielman said that the group might need to increase the size of its rights issue to more than £5 billion because ratings agencies would demand that Imperial, the Bristol-based manufacturer of Superkings, Lambert & Butler and Embassy cigarettes, obtains more conservative credit ratios. He added that the price that Imperial is able to raise from the expected subsequent sale of Logista, Altadis’s logistics subsidiary, is likely to be significantly lower than had been hoped.

Private equity bidders are seen as the most likely buyers for Logista, the largest distributor of tobacco and stamps in Spain and Portugal. However, they are less likely to be able to afford a premium price than a few months ago because of upheaval in the debt markets. “It now looks much harder for a buyer to raise the financing,” Mr Spielman wrote.

Another potential issue is Imperial’s share price. If it is depressed because of a wider market sell-off, Imperial would have to increase the number of shares issued to boost the sterling amount. Citigroup said that it had assumed that Imperial would be trading at £23.50 immediately prior to the rights issue.

Not everyone agreed with the Citigroup view. Andrew Darke, tobacco analyst for Evolution Securities, pointed out that the deal was unlikely to be completed before November and it was impossible to know whether credit and equity markets might have stabilised by then.

A spokesman for Imperial declined to comment. The group is awaiting approval for the deal, which values Altadis at €50 a share, or €12.6 billion, (£8.5 billion) from CNMV, the Spanish regulator, either next month or in October.

Assuming that Imperial succeeds, the deal will make it the second-biggest cigarette maker in Europe with the top spot in the UK and the No 2 placings in Germany, France and Spain.

Gareth Davis, Imperial’s chief executive, is hoping to make €300 million of cost savings by combining the two businesses. Imperial would remain the world’s fourth-largest tobacco company, behind Altria, the owner of Marlboro, British American Tobacco and JTI, which recently acquired Gallaher, of Britain.

Shares in Imperial closed down 22p at £21.38 yesterday.

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