BAT offers US$47b to buy out Reynolds
BRITISH American Tobacco (BAT) has offered to buy United States tobacco company Reynolds American Inc in a US$47 billion (RM196.93 billion) deal that would bring together Newport, Kent and Pall Mall cigarettes in the world’s biggest listed tobacco company.
The British group, which has a 42 per cent stake in Reynolds, said its offer valued the company’s shares at US$56.50, of which US$24.13 would be in cash and US$32.37 would be in BAT shares, representing a premium of 20 per cent over the closing price of Reynolds stock on Thursday.
The total price for the remaining 57.8 per cent of Reynolds would be US$47 billion, of which about US$20 billion would be in cash and US$27 billion in BAT shares.
BAT chief executive Nicandro Durante said the deal would create the US market leader and the world’s largest listed tobacco company by net turnover and operating profit.
Shares in BAT have traded at alltime highs since Britain voted to leave the European Union in June, a shock decision that sent the pound tumbling and boosted the
US MARKET LEADER: Mega deal set to create world’s largest listed tobacco firm
stock prices of companies that make most of their revenue outside the United Kingdom.
BAT shares, which reached a high of 5,135 pence (RM263.80) in July, were trading up 2.3 per cent at 4,913 pence at 0722GMT. If successful, the takeover would be one the biggest this year by a British company.
The tie-up is one of the only mega deals left in a global tobacco industry, which is dominated by six companies, and it would create the only player with a major presence in both US and international markets.
Reynolds, which bought Newportmaker Lorillard in 2014, and Altria Group dominate the US market.
Smoking rates in the US and other western markets are declining, due to increasing health consciousness and greater regulation
on Wednesday after its third-quarter earnings came in six per cent short of market forecast. Bloomberg pic
and taxes. All big tobacco firms are investing in e-cigarettes and other vapor-based products, to diversify.
BAT has in recent years focused on international markets, such as Ukraine, Bangladesh, Russia, Vietnam and Turkey. Its brands are sold in more than 200 markets, with market-leading positions in at least 55.
Reynolds’ stock fell to a 12month low on Wednesday after its third-quarter earnings came in 6
per cent short of market forecast, Jefferies analysts said, on the back of a disappointing 1.5 per cent fall in domestic cigarette volumes.
BAT also said it had performed well in the first nine months, growing both revenue at constant rates of exchange and cigarette volumes, driven by its focus.
Year-to-date revenue grew 8.1 per cent at constant rates of exchange, it said, as its biggest brands sold 9.8 pe cent more cigarettes. Reuters