British American Tobacco/Reynolds: smokin’ deal
“Just as everyone was expecting a mega American offer for one of the FTSE 100 giants, along comes a deal in the opposite direction,” said Alex Brummer in the Daily Mail. British American Tobacco – a “much-loved stock for investors without scruples” – has bid £38bn for the 58% of North Carolina-based R.J. Reynolds that it doesn’t already own. The main benefit of the deal for BAT, which owns the Rothmans and Lucky Strike brands, is the extra market share it will grab in the US where Reynolds (home town Tobaccoville) sells Camel, Newport and Pall Mall. But BAT’s Brazilian boss, Nicandro Durante, is also hoping to establish the brands more deeply in emerging markets, “with Brazil as a stronghold”. And if the deal goes ahead (US anti-trust authorities will want to take a look), it will give him a good springboard, said Iain Dey in The Sunday Times. The “enlarged BAT” would become the second or third-largest company in the FTSE 100 – and the world’s largest tobacco firm. “None of this fits the narrative of weakened British titans being stolen on the cheap.” Admittedly, BAT may need “to cough up a little more to get the deal over the line”, but the market seems optimistic it will happen.