British American Tobacco (BAT) launched a share buyback programme on Monday backed by the proceeds of a stake sale in ITC.

The London-based tobacco giant sold 43.68 crore shares in ITC, representing 3.5 per cent of the company’s shares at Rs 400.25 apiece last week.

The net proceeds from the share sale stood at £1.57 billion and the programme launched on Monday will buy back £1.60 billion of BAT ordinary shares starting with £700 million in 2024 and £900 million in 2025.

The purpose of the buyback is to reduce the issued share capital of BAT, the maker of Dunhill and Kent. The purchased shares will be cancelled. BAT has entered into an agreement with UBS AG London Branch to enable the purchase of ordinary shares for the initial stage of the programme.

UBS will purchase BAT’s ordinary shares as principal and the company will purchase such a number of ordinary shares from UBS under the terms of the engagement.

The company had previously halted the buyback programme at the end of 2022, ticking off a number of institutional shareholders, who demanded the share purchase should resume. BAT had then argued for capital allocation in favour of deleveraging amid rising interest rates.

BAT’s stock performed well on the bourses, rising 2.5 per cent to close at £2,399 a share on Monday. The stock has rallied from the £2,276 range in the last one week.

The number of ordinary shares permitted to be purchased, pursuant to the authority granted by the shareholders at the annual general meeting of the company on April 19, 2023, is 223,590,721.

The programme will be carried out on recognised investment exchanges within the UK and no repurchases will be made in respect of the company’s ADRs.