Tobacco giant eyes $47 billion merger 

British American Tobacco has launched a $47 billion (£38 billion) bid to buy US tobacco giant Reynolds.

The tobacco giant, which already owns 42.2% of Reynolds, has offered $55.5 per share for the outstanding 57.8%. This represents a premium of 20% to Reynolds closing price on 20 October 2016.

BAT intends fund the deal through $20 billion worth of cash, with the remainder covered by BAT shares.

BAT has a wide range of brands in its portfolio, including Dunhill, Lucky Strike and Rothmans, while Reynolds’ stable includes Camel, Newport and Pall Mall.

In a statement to the London Stock Exchange,  BAT said the deal would create a ‘stronger, truly global tobacco and next generation products (NGP) company. This includes a ‘world class’ pipeline of vapour and tobacco heating products across all the fastest growing NGP markets globally.

It also noted the deal would give it ‘significant presence’ in high growth emerging markets across South America, Africa, the Middle East and Asia, together with the most attractive developed markets.

BAT expects the merger – which needs to shareholder approval on both sides – to be earnings accretive in the first full year and also boost dividends.

BAT chief executive, Nicandro Durante 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.’

He added: ‘BAT is proud of its track record of consistent delivery for shareholders and this transaction would further strengthen that delivery in the future.’

Source: CityWire

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