Britain's Imperial Tobacco will continue to push for a deal to acquire Franco-Spanish tobacco company Altadis, which rejected an offer of 45 euros ($59) a share.
Meanwhile, Philip Morris parent Altria is considering its own bid for Imperial tobacco, the Financial Times reported Saturday.
Imperial, which makes Lambert and Butler and Embassy cigarettes, offered 11.5 billion euros ($15.3 billion) for Altadis on Thursday and began a possible bidding war in the consolidating tobacco industry.
Altadis, known for its Gauloises brand, turned down the Imperial offer as too low and sees 53 euros per share -- the price Japan Tobacco paid for British tobacco firm Gallaher Group -- as an adequate value, a person familiar with the company told Reuters.
"We've seen the Altadis announcement. We will be discussing it and look forward to progressing further friendly dialogue," said Imperial spokesman Alex Parsons.
Imperial's informal approach on Altadis was considered a potentially hostile bid by members of the Franco-Spanish company's board, Spanish press reported on Sunday.
Hostile bids are difficult to execute in the tightly regulated sector and have not been attempted in recent years.
Around 50% of Altadis shares are in the hands of British and North American funds, among them Fidelity and Franklin Resources, as well as Morgan Stanley. Another 20% belongs to institutions in Spain and France while minority shareholders hold just 10% of the company.
Altria Monitoring Situation
Altria is "looking hard" at whether to intervene in Imperial's pursuit of Altadis, the FT reported.
Imperial's bid signaled a start of large-scale consolidation in the sector, Analysts told the paper.
“(This) might well be Altria’s last chance to bid for Imperial,” said Goldman Sachs analysts, according to the FT.