BAT/Reynolds: deal up in smoke?
It was billed as the biggest foreign deal by a British company in recent years, but is British American Tobacco’s takeover of the US ciggies merchant Reynolds still a runner? Reuters reported this week that Reynolds American had rejected BAT’s $47bn offer to buy the 42% of the company it doesn’t own – a move that would have created the world’s biggest listed tobacco company. Reynolds, which owns the Camel and Newport brands, is said to be holding out for a higher price. BAT’s cash-and-stock offer would mark its return to the “lucrative and highly regulated US market after a 12-year absence”, said CNBC – and was thought likely to trigger copycat deals. Some analysts predicted that it could “encourage” the current market leader, Philip Morris International, to reunite with its US affiliate, Altria, reversing a 2008 spin-off. Reynolds’s reluctance to light up a deal may be linked to the US election. During the campaign, Donald Trump expressed his reservations about the buyout – and we can expect the US “to become wary of inbound takeovers” under his presidency, said Jonathan Guthrie in the FT. But the merger is unlikely to be derailed “unless hefty shop-floor redundancies look likely”. Reynolds has blown “a raspberry” at BAT. But a “small bump” in price could yet seal the deal.