$49B merger to create tobacco giant

LONDON — British American Tobacco will take over Reynolds American Inc. to create likely the world’s largest publicly traded tobacco company that would seek to capitalize on growing demand for electronic cigarettes in the U.S. and traditional ones in developing countries.

BAT, which sells Dunhill, Rothmans and Lucky Strike cigarettes, is interested in Reynolds’ greater market share in the U.S., where use of e-cigarettes is growing fastest.

On the other hand, it would be able to market Reynolds’ brands such as Newport, Camel and Pall Mall across a range of developing economies, where anti-smoking campaigns are not as strong as in the U.S. and Europe.

“This is a big move; that makes a lot of sense for BAT,” said Steve Clayton, a fund manager for financial services firm Hargreaves Lansdown. “They already had billions tied up in Reynolds, now they will have billions more but with full control of the company and its cash flows.”

BAT will pay about $49 billion to buy the 57.8 percent of the Reynoldsshares it doesn’t already own. Reynolds shareholders will receive for each share $29.44 in cash and 0.5260 BAT shares.

That values Reynolds, based in Winston Salem, N.C., at $59.64 per share, or $85 billion in total.

The merger would create a company likely to overtake Philip Morris International Inc. as the biggest publicly traded tobacco company.

AP FILE PHOTO British American Tobacco is interested in Reynolds’ brands, including Camel and Newport.