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‘Vulture’ fund pioneer Dart builds £5bn stakes in tobacco

Kenneth Dart, the billionaire investor known for “vulture” trades in government debt, has built stakes worth nearly £5bn in two of the world’s biggest tobacco groups.

The secretive Cayman Islands-based heir to a US foam-cups empire has, through his Spring Mountain Investments fund, taken a 7 per cent stake in British American Tobacco and bought 3 per cent of rival Imperial Brands.

Spring Mountain’s holding in BAT, the maker of Lucky Strike and Dunhill cigarettes, is worth roughly £4.5bn and makes the fund controlled by Dart the FTSE 100 company’s third-biggest shareholder.

Dart’s fund has gradually increased its stake since first crossing the 3 per cent disclosure threshold in October last year. In April, it also declared a 3 per cent stake in Imperial, making it one of tobacco group’s ten-largest shareholders with stock valued at roughly £450m.

The investments come as tobacco stocks face pressure, including from the growing influence of ESG investment and regulatory scrutiny fuelled by health concerns. BAT has shed more than a third of its market value over the past five years, while Imperial has slumped by almost two-thirds.

BAT and Imperial declined to comment on their relationship with Dart. Through a representative, the notoriously private investor said: “While we understand your interest, we do not comment on investment decisions.”

Rae Maile, an equity research analyst at Panmure Gordon who has covered tobacco for more than 30 years, said “a new investor has built a near £5bn position . . . without anyone really noticing”, reflecting “a level of antipathy” among fund managers towards tobacco.

Jonathan Fell, partner at consumer goods investment house Ash Park Capital, added that it was “pretty rare in a stock the size of BAT to see one individual put in that much money”.

Dart helped pioneer so-called vulture funds, through which investors snap up debt of countries in financial distress and attempt to profit from the eventual restructuring. In 1994, he launched a lawsuit against Brazil and its $40bn debt restructuring, reportedly securing a $600m payout for his fund. He has since profited from crises in both Argentina and Greece.

A New York Times investigation into Michigan-born Dart’s infrastructure investments in the Cayman Islands, where he moved in the early 1990s, states that he has not spoken to the media since 1993. He owns a large eponymous conglomerate that operates out of the isles, which according to its website runs and invests in businesses spanning real estate, hospitality, retail, entertainment, finance and biotech.

According to Bloomberg data, the only other disclosed position for the $6.4bn Spring Mountain fund is in Workspace Group, the London-listed flexible-office provider, which operates as a retail investment trust.

Maile doubted that Dart would take “no view at all on the direction” of the businesses. “Given the reported history of previous investments, it seems unlikely that he will be simply a passive investor, taking his dividend,” he said.

Additional reporting by Joe Rennison


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