Shareholders of U.K. firm, Reynolds OK tobacco deal
RALEIGH, N.C. — Shareholders of British American Tobacco and Reynolds American Inc. on Wednesday approved merging into the world’s largest publicly traded tobacco company.
Shareholders of both companies approved London-based British American Tobacco buying the 57.8 percent of Reynolds it does not already own. The purchase is expected to become effective next week. Each Reynolds share will convert to $29.44 in cash and 0.5260 British American Tobacco shares.
The $49 billion cash-andstock offer announced in January valued each Reyn-
olds share at $59.64, up from $56.50 offered in October. The price is nearly 40 percent above the value of Reynolds shares before the October offer, British American Tobacco said in a disclosure to U.S. securities regulators.
“We look forward to welcoming Reynolds group employees to British American Tobacco and to realizing the benefits of operating these two great companies as one stronger, global tobacco and Next Generation Products business,” British American Tobacco Chief Executive Nicandro Durante said in a prepared statement.
The takeover is the latest in the string of consolidations that has seen the number of cigarette companies shrink this century. The deal gives British American Tobacco greater access to the U.S. market, where cigarette prices
and taxes are low relative to consumer incomes, but the customer base in shrinking. The combined company gains strength to increase sales in developing countries, where health restrictions aren’t as strict. The combination also improves the sales push of vapor and nicotine replacement products and development of other new products.
British American Tobacco projects saving at least $400 million a year through costcutting of corporate operations, increased purchasing power, and other supply-chain efficiencies. British American Tobacco also expects to add about $38 billion of debt with the acquisition on top of nearly $22 billion at the end of last year, the company said in a securities filing last month.
British American Tobacco sells Dunhill, Rothmans, Kent, Benson & Hedges and Lucky Strike cigarettes. The company said its cigarettes reach about 12 percent of the world’s 1 billion smokers. The
company also sells roll-yourown cut tobacco, snus, cigars and vapor products.
Winston-Salem, N.C.based Reynolds is the secondlargest U.S. cigarette company and owns the Camel and Pall Mall cigarette brands. Reynolds estimates that about half of its consolidated net sales last year were from menthol cigarettes, driven by segmentleader Newport. The company also sells smokeless tobacco, Natural American Spirit cigarettes and nicotine replacement products.
British American Tobacco was established in 1902 and spread across the former British Empire, including India and East Africa.
Reynolds traces its roots to 1875, when Richard Joshua Reynolds started a chewingtobacco company in the city that has been its headquarters since. The takeover marks an end for what became R.J. Reynolds Tobacco, which stamped its home state of North Carolina as a center
during a bygone era of smoking’s popularity through its Winston and Salem brands.
The company’s links with British American Tobacco date to 2004, when R.J. Reynolds Tobacco Co. merged with British American Tobacco’s Brown & Williamson unit, creating Reynolds American. The two companies already have a technology-sharing agreement in the development of electronic cigarettes.