LONDON (Reuters) - Tobacco company Imperial Brands (IMB.L) and nutritional ingredients maker Glanbia (GL9.I) are attractive targets for Japanese companies looking to expand into international markets, Exane BNP Paribas analysts said in a note to clients.

Japan Tobacco (2914.T) could potentially acquire Britain's Imperial Brands, while Japanese food and ingredients maker Ajinomoto (2802.T) could target Ireland's Glanbia.

"M&A activity is being driven in large part by the need to cut costs in the absence of organic growth rather than by burgeoning over-optimism," they said in a note.

ADVERTISEMENT

"There is probably some way still to go in the M&A cycle barring a systemic accident, especially in Europe where economic optimism is only just lifting itself off the canvas."

Exane said that Japan Tobacco, which is facing significant pressures in both its domestic market and in some of its biggest international markets, could get exposure to the attractive U.S. market via Imperial Brands.

Anti-trust issues, particularly in the UK market, could be a stumbling block, the broker noted.

Exane viewed Glanbia as offering a "once-in-a-lifetime opportunity" for Ajinomoto toward becoming a global player in food & health.

M&A activity has gathered pace in Europe. German industrial gases group Linde (LING.DE) and U.S. suitor Praxair (PX.N) have agreed for a $65 billion-plus merger, while Italy's Luxottica (LUX.MI) and France's Essilor (ESSI.PA) have agreed a 46 billion euro merger to create a global eye wear powerhouse.

A $143 billion offer for Unilever (ULVR.L) from U.S. food company Kraft Heinz (KHC.O), while soon withdrawn, surprised markets and has underscored the importance of M&A as a key theme for investors in 2017.

ADVERTISEMENT

(Reporting by Atul Prakash, Editing by Vikram Subhedar)