Financier Ends Hostile Effort to Acquire BAT : Takeover bid: Regulatory hurdles cited in Sir James Goldsmith’s $21-billion failed move on British firm.

Anglo-French financier Sir James Goldsmith said today he is dropping his $21-billion takeover bid for Britain’s BAT Industries PLC, ending the second-biggest takeover battle ever launched.

Goldsmith’s takeover vehicle, Hoylake Investments Ltd., unveiled the bid for the tobacco, financial services, retailing and paper giant in July but ran into significant regulatory hurdles to its bid.

The hostile offer threw BAT into a massive restructuring in which it announced plans to shed its far-flung U.S. retailing empire and boost profits.

In a brief statement the consortium led by Goldsmith, said: “The directors of Hoylake wish BAT and its unbundled offspring great success within their new structures.”

Last week BAT agreed to sell upscale Chicago retailer Marshall Field & Co. to Minneapolis-based Dayton Hudson Corp. for $1.04 billion. It is also auctioning Saks Fifth Avenue, a premier New York department store company.

Axa Midi Assurances, a French insurance group, said it is withdrawing its $4.5-billion bid for BAT’s Farmers Insurance Group of Los Angeles. The French group was in partnership with Goldsmith and had planned to buy Farmers had the hostile bid for BAT succeeded.

The sale of the insurance unit was key to Goldsmith’s bid but since Farmers operates in nine states it needed approval by the states’ insurance commissioners.

The approval process was slow, however, and ran into a significant roadblock when the California Insurance Commissioner rejected the deal April 9.

“While we understand the Hoylake board’s decision to cease its bid for BAT, we are naturally disappointed,” said Claude Bebear, Axa chairman. “In light of this situation, we will withdraw our applications for the regulatory approval to acquire Farmers.”