LONDON (AP) _ BAT Industries PLC says it will press ahead with its massive asset sales program even though Sir James Goldsmith has dropped his hostile $22 billion takeover bid for the British conglomerate.

BAT drew up the restructuring plan hoping to boost its stock price and fight off the Anglo-French financier's all-paper bid of 878 pence a share, or the equivalent of $14.31.

The plan calls for BAT to sell its retailing and paper businesses - including Saks Fifth Avenue and the just-sold Marshall Field's - in order to concentrate on tobacco and financial services. It also includes the repurchase by the company of up to 10 percent of its stock.

Goldsmith's withdrawal, announced after the stock market closed Monday and blamed on regulatory frustrations involving BAT's U.S. insurance subsidiary, was expected to depress BAT's share price.

The shares fell 24 pence, or around 39 cents, to 700 pence, or $11.41 on London's Stock Exchange at midday today. The news of the withdrawal came after Monday's close.

''It's obviously going to be a little bit unsettled in the short-term,'' said Jack Jones, an analyst with the brokerage UBS Philips and Drew.

But Kishore Bangor, an analyst with Prudential-Bache Securities in London, said investors would turn their attention to BAT's fundamentals and the stock would look relatively cheap.

The offer by Goldsmith's Hoylake Investments Ltd. would have been the world's second-largest takeover after Kohlberg Kravis Roberts & Co.'s $25 billion purchase of RJR Nabisco Inc., completed early last year.

Hoylake launched the offer in July, then suspended it in September while it sought regulatory approval.

Two weeks ago, California's insurance regulators decided to bar a change of control of BAT's Farmers Insurance Group Inc. of Los Angeles. The offer needed approval from the commissioners of a total of nine states where Farmers operates.

Hoylake abandoned its bid because of delays caused by the U.S. regulatory process, said a London source close to the company.

''We have always felt we could achieve a favorable position but it could take quite a while,'' said the source, who spoke on condition of anonymity. ''We didn't feel it was in the best interests of the shareholders given the uncertainties.''

Hoylake had planned to sell Farmers for $4.5 billion to the French insurance group Axa-Midi Assurances. Axa-Midi announced in Paris Monday that it has dropped its bid.

BAT Chairman Patrick Sheehy welcomed Hoylake's withdrawal in a statement. ''Shareholders gave overwhelming support to our reshaping proposals last October,'' he said, referring to a shareholder vote backing the restructuring plan.

''Today's overdue decision by Hoylake does not alter our resolve to see that program through to its completion and to continue to maximize value for our shareholders.''

Last week, BAT announced the sale of its U.S. retailer Marshall Field's to Dayton Hudson Corp. for $1.04 billion. The company also has put Saks Fifth Avenue on the auction block.

Goldsmith and other shareholders have complained that BAT's stock price does not reflect its value because it is dragged down by the slower growth of the tobacco businesses, which include Brown & Williamson in the United States.

Goldsmith and his Hoylake partners, who included British merchant banker Jacob Rothschild and Australian businessman Kerry Packer, had wanted to ''unbundle'' BAT by selling off all its non-tobacco operations.

In its statement Monday Hoylake said, ''The directors of Hoylake wish BAT and its unbundled offspring great success within their new structures.''