MARLBORO * WINSTON * L&M * CAMEL * PARLIAMENT * KENT

The Madrid company is a leading maker of cigarettes in Spain and France and is the world's largest maker by output of cigars, a fast-expanding global...

Two bidders are expected to make competing offers for Altadis SA within days, people close to the matter said, that could value the cigarette and cigar maker at €13 billion ($17.5 billion) or more and result in one of the biggest tobacco deals ever.

Imperial Tobacco Group PLC of London and Luxembourg private-equity firm CVC Capital Partners Ltd. have been negotiating terms and conditions in recent days with Altadis, the maker of Gauloise, Gitane and Ducados cigarettes, in anticipation of making formal bids by next week, these people said.

A CVC spokeswoman declined to comment. Spokesmen from Imperial and Altadis also declined to comment.

In May, CVC said it could potentially bid €50 a share, or about €13 billion, topping two earlier bids from Imperial that Altadis had rebuffed. Since then, Imperial and CVC have been poring over the company's books.

A deal by CVC would be one of the largest private-equity buyouts ever in Europe, and the aggressive financing package that it has put together comes as other similar deals have struggled. Many of the banks providing financing are planning to buy equity in addition to debt, people involved in the deal said. Some bankers criticize such arrangements because they add to their risk.

It isn't certain that CVC will proceed with a bid, one person close to the matter cautioned. Bankers involved in the deal said it is likely a formal bid will be made.

CVC's financing for Altadis was largely put together before the recent bond-market wobbles that hurt the prices of many high-yield bonds sold to finance other leveraged buyouts. CVC's financing has held up amid the turbulence, because the cash flow from Altadis's cigarette and cigar businesses is so strong, people involved in the deal said.

Private-equity acquisitions have typically focused on companies with steady earnings that can be used to back copious amounts of debt. The debt - or leverage, as it is referred to in the industry - makes the acquisitions possible by enabling private-equity firms to buy much larger companies than they otherwise could, and by boosting the returns they earn on their investors' money used for the purchases.

As the industry has expanded, private-equity firms have targeted businesses beyond the typical cash-flow-driven companies of the past. They also are looking for companies that can be broken up, restructured, or that hold assets such as real estate that are undervalued by stock-market investors.

Altadis, with its high cash flow, is more of a classic type of target. The Madrid company is a leading maker of cigarettes in Spain and France and is the world's largest maker by output of cigars, a fast-expanding global business that has much higher operating margins than cigarettes. The company holds a 50% share of Habanos SA, the state-controlled Cuban maker of cigars.