BAT offers to buy U.S. tobacco firm Reynolds in $47 billion deal
Staff Writer | October 21, 2016
British American Tobacco (BAT) has offered to buy U.S. tobacco company Reynolds American in a $47 billion deal.Article continues below
The takeover would give BAT a leading position in the high-value United States market and more premium brands such as Camel which it can sell in countries including Russia and Turkey where demand for Western cigarettes is still growing.
The British group, which already has a 42 percent stake in Reynolds, said its offer valued the company's shares at $56.50, of which $24.13 would be in cash and $32.37 would be in BAT shares, representing a premium of 20 percent over the closing price of Reynolds stock on Thursday.
The total price for the remaining 57.8 percent of Reynolds would be $47 billion, of which approximately $20 billion would be in cash and $27 billion in BAT shares, BAT said.
BAT Chief Executive Nicandro Durante said the deal would create a U.S. market leader and the world's largest listed tobacco company by net turnover and operating profit.
"The strategic rationale makes perfect sense," Guy Ellison, an analyst at Investec Wealth & Investment, said. The deal would pivot BAT further towards the high value U.S. market, consolidating some strong brands and Reynold's position in "next generation tobacco" products such as e-cigarettes, he added.
The cost synergies associated with the proposed merger are estimated by BAT to be relatively modest at around $400 million. ■ What to read next
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