BAT smokes out mega $49.4bn deal to acquire Reynolds

BY Fraser Tennant

A mega deal which creates the world's biggest listed tobacco company, British American Tobacco (BAT), has agreed a $49.4bn deal to acquire its US rival, Reynolds American Inc.

Under the terms of the agreement, Reynolds shareholders will receive for each Reynolds share $29.44 in cash and 0.5260 BAT ordinary shares, represented by BAT American Depository Receipts (ADRs). The cash component of the transaction will be financed by a combination of existing cash resources, new bank credit lines and the issuance of new bonds.

Shareholders in Reynolds since 2004, BAT will acquire the 57.8 percent of Reynolds it does not already own.

“BAT has consistently executed a winning strategy and has a proven track record of delivering strong results and returns for its shareholders while successfully investing for future growth,” said BAT’s chief executive, Nicandro Durante. “Our combination with Reynolds will benefit from utilising the best talent from both organisations. It will create a stronger, global tobacco and NGP business with direct access for our products across the most attractive markets in the world.” 

With a strong track record of successfully integrating acquisitions, BAT is committed to Reynolds American’s US workforce and manufacturing facilities. Moreover, the combined business will be the only truly global company in the fast growing Next Generation Products (NGP) category, with a unique opportunity to leverage scale and insights across the largest and fastest growing NGP markets and categories.

The BAT/Reynolds transaction will see leading brands such as Dunhill, Kent, Lucky Strike, Pall Mall, Rothmans, Newport and Natural American Spirit under common ownership, with direct access to the most attractive markets in the world. 

“We look forward to bringing together the two companies’ highly complementary cultures and shared commitment to innovation and transformation in our industry,” said Debra A. Crew, Reynolds American’s president and chief executive. “BAT is the best partner for Reynolds American’s next phase of growth, and together the two companies will create the leading portfolio of tobacco and next generation products for adult tobacco consumers.”

Unanimously approved by the Transaction Committee of independent Reynolds directors established to evaluate the BAT offer, as well as the boards of BAT and Reynolds, the transaction is expected to close during the third quarter of 2017.  

Mr Durante concluded: “We believe this transaction will drive continued, sustainable profit growth and returns for shareholders long into the future."

News: BAT agrees to buy Reynolds for $49 billion

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