European regulators are expected to give a green light to Imperial Tobacco’s £9.5 billion takeover of Altadis, the Spanish owner of Gauloises and Gitanes cigarettes, as early as Thursday.

But Imperial, the Bristol-based maker of Embassy, Regal and Superkings, could be forced to dispose of some of its pipe and rolling tobacco brands in France and Spain in order to satisfy competition concerns.

Earlier this month, the European Commission extended by two weeks its review of the proposed tie-up, which is set to cement Imperial’s position as the world’s fourth largest tobacco group, in order to examine competition concerns raised by some national regulators.

Imperial, the world’s leading rolling tobacco maker, already controls 56 per cent of the fine cut tobacco market in Spain and 27 per cent in France.

The company, whose brands include Golden Virginia, Drum, Van Nelle and Interval as well as Rizla rolling papers, sold 23,600 tonnes of rolling tobacco across Europe during 2006.

Altadis, which owns the Amsterdamer and Kennings brands and operates a rolling and pipe tobacco factory at Metz in Northern France, is also a major player although its sales generate only a small fraction of the group’s 4 billion euros of total sales.

The EU, whose final ruling on the deal is expected today, is not expected to derail or significantly delay the takeover but may seek assurances from Imperial to divest some brands in areas where the takeover will push the combined group’s market share to a level which raises competition concerns.

The combination of Altadis and Imperial’s much bigger cigarette and cigar businesses is not expected to raise significant competition concerns.

Imperial is also widely expected to dispose of Altadis’s Logista distribution business for strategic reasons.

The EU’s green light is likely to be followed by approval from the CNMV, Spain’s securities regulator before the end of this month. An EGM will then be held by Altadis to rubber stamp the 50 euro per share offer, which is likely to be completed by Christmas.

The takeover of Altadis by Imperial will create a group with combined volumes of 312 billion cigarettes per year and net sales of £6 billion.

The deal will be financed by a rights issue of an estimated £5 billion, making it one of the largest in the history of the City.

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