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Imperial Tobacco announces share buyback programme

UK tobacco company Imperial Tobacco has announced a £200 million ($377 million) share buyback programme ? its first for nine years. The programme, which will begin in the next few weeks, will utilize most of the company's $450 million per annum free cash flow. CEO Gareth Davis said the programme did not mean the company was ruling out acquisitions as a source of revenue. ?As I have said before, we are still interested in further acquisitions and we will continue to seek value creating deals,? he said.

Instead of cancelling the shares it repurchases, the company plans to take advantage of recent changes in UK rules and hold them in its treasury in case acquisition opportunities arise.

Morgan Stanley analyst Jonathan Fell described the buyback plans as a sensible move on Imperial Tobacco's part. ?Any earnings-enhancing effect for 2005 will be small, but on an ongoing basis we would expect the buyback programme to boost earnings a share by about 2% a year,? he said.

With the tobacco industry seeing a decline in acquisition opportunities, share buyback programmes have become popular as a means of returning value to shareholders. British American Tobacco, the world's second largest cigarette maker, has had an ongoing buyback programme since February 2003.

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