British American Tobacco plans $47bn merger with US firm Reynolds

Mon, 24 Oct 2016 | MERGER

British American Tobacco (BAT) plans to merge with its US partner Reynolds to create the biggest tobacco firm in the world in a deal valued at $47 billion (£38 billion).

BAT, whose brands include Dunhill and Lucky Strike, already owns 42.2 per cent of Reynolds and wants to buy the remainder of the company.

Reynolds is the second-largest tobacco firm in America. Its cigarette brands include Newport, Camel and Pall Mall.

FTSE 100-listed BAT is offering $20 billion (£16 billion) in cash and $27 billion (£22 billion) in shares for the US business, valuing it at $56.50 (£46) a share.

Last year, Reynolds acquired US tobacco firm Lorillard for $25 billion (£20 billion), strengthening its position as a leading American cigarette brand.

BAT’s move has surprised some analysts, who didn’t expect a UK firm to be so bold post-Brexit.

Dominic O'Connell, a business presenter on the BBC Radio 4’s Today programme, said: “This is the biggest foreign deal by a British company in recent years, and flies in the face of the prevailing, post-Brexit wisdom that a weak pound would stop British companies buying foreign rivals.”

If combined, the company would be the world’s largest listed tobacco firm by turnover and operating profit.

Nicandro Durante, BAT chief executive, said: “We have been a shareholder in Reynolds since its creation in 2004 and have benefited from its growth in the US market. The acquisition of Lorillard in 2015 has further strengthened Reynolds’s business. The proposed merger of our two great companies is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and Next Generation Products company.

“BAT is proud of its track record of consistent delivery for shareholders and this transaction would further strengthen that delivery in the future."


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