BAT hits top tobacco spot
BRITISH American Tobacco has struck a $49.4billion (£40billion) deal to become the world’s biggest quoted tobacco company by taking full control of US rival Reynolds American.
FTSE 100 giant BAT, maker of Dunhill and Lucky Strike, sweetened a $47billion cash and shares offer made last October to acquire the 57.8 per cent that it did not already own in Reynolds, America’s No 2 player behind Altria, which owns Philip Morris USA.
It already owned a significant minority stake in the Newport, Camel and Pall Mall owner, having folded its US subsidiary Brown & Williamson into Reynolds 13 years ago.
BAT said the acquisition would boost its presence in the growing e-cigarette sector and strengthen its position in US and high-growth emerging markets.
It also expects to generate $400million in annual cost savings by the end of the third year after the deal is completed. It will finance the cash portion of the offer through existing cash resources, new bank credit lines and issuing new bonds.
BAT chief executive, Nicandro Durante, pictured, said: “Our combination with Reynolds will benefit from utilising the best talent from both organisations.
“It will create a stronger, global tobacco and next- generation products business with direct access for our products across the most attractive markets in the world. We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future.”
Hargreaves Lansdown fund manager Steve Clayton said: “This is a big move that makes a lot of sense for BAT. The States is an attractive market, with good pricing dynamics, and BAT can also take Reynolds’s portfolio of new-generation tobacco products and sell them worldwide. “BAT is now the clear global leader in the industry, just at the point where the new generation of reducedharm products could be set to create an inflexion point for sector growth.
“The sheer scale of the enlarged BAT raises the pressure on the remaining players to bulk up too, and attention is likely to turn to Imperial Brands, who look more and more like a minnow swimming in a tank of big, hungry fish.”