Gallaher, the cigarette manufacturer that employs about 1,100 people in Ireland, is at the centre of takeover speculation.

The Franco-Spanish tobacco giant Altadis is rumoured to be preparing a bid for the manufacturer of Ireland's most popular cigarette brand, Benson & Hedges.

A bid by the group is seen as viable because it would not face the same regulatory obstacles as other potential bidders, given its relatively small profile in the British tobacco market.

Valued at about £7.2 billion (€10.6 billion) including debt, Gallaher is seen as the most likely target in the UK tobacco sector. Japan Tobacco was also mooted recently as a possible buyer of the company.

A spokeswoman for Gallaher said the company does not comment on rumour or speculation.

Gallaher employs about 1,100 people in Tallaght, Dublin, and at Lisnafillan in Ballymena, Co Antrim. The company moved its manufacturing to the North in 2003, but kept a customer service, sales and marketing, and human resources operation in Dublin, where it employs about 70 people.

It estimates its total contribution to Ireland's economy - North and South - at €74 million in wages and another €40 million related to other costs. Gallaher's other well-known brands include Silk Cut, which won a 26.3 per cent share of the Irish market in the first half of 2006.

Gallaher, which sold 174 billion cigarettes last year and 85.5 billion in the first half of this year, is one of three tobacco companies joined with the State in an effort to block lawsuits brought by 17 Irish claimants.

In a case that opened last week, the companies are claiming a fair hearing is impossible because the State would face a "roving inquiry on health matters from the 1940s to the present day".

On the opening day of the hearing on November 14th, the court heard details of a 57-year-old man who started smoking when he was 12 and became addicted. John Thomas McCormack, from Abbeylara, Co Longford, brought his case in 2000. Since then he has smoked 60 Silk Cut per day, claiming he has been unable to stop and has suffered health damage.