BAT/Reynolds: deal up in smoke?

The Week Middle East - - Business -

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.

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