Reynolds American To Merge With British American Tobacco For $49B

18 January, 2017, 01:15 | Author: Celia Hoffman
  • Reynolds American To Merge With British American Tobacco For $49B

On Tuesday, British American Tobacco announced that its bigger offer to acquire the remaining stake in Reynolds American that it already did not own was accepted.

British American first tried to buy out the rest of Reynolds in October of past year, offering $47 billion for the rest of the company.

The combined company will have a strong foothold in the United States, and a significant presence in high-growth markets including South America, the Middle East and Africa.

The mega-merger comes after months of talks between the pair and sees BAT, which already owns 42.2% of Reynolds, unveil a higher offer of 59.64 USA dollars (£49.27) a share for the remaining 57.8% of the company.

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"If the deal secures shareholder and regulatory approval, it will bring BAT back to the US market more than a decade after it folded its USA subsidiary, Brown & Williamson, into Reynolds in exchange for a large minority stake", report Lauren Fedor and Mehreen Khan for Financial Times. Since BAT would now own all of Reynolds American stock, Reynolds American would become an American subsidiary of BAT.

The new entity would have a big share of the US market along with a major presence in Asia, Africa, South America, and the Middle East, said a BAT spokesperson. The value of that bid had dropped as BAT shares declined following the bid.A merger "creates a stronger, truly global tobacco" business, BAT said. Shares registered one year high at $56.48 and the one year low of $30.35. By making a further investment, the company can now exercise full leadership and control of Reynold's products, their direction, and profits. The stock had a trading capacity of 2.98M shares. The median one-year price target of 11 analysts covering the company is $55.00, which suggests the stock could still rise over -2 percent. Weil, Gotshal & Manges LLP and Moore & Van Allen PLLC are lawyers for Reynolds American's transaction committee and Goldman Sachs Group Inc.is its financial adviser.

Some say that company's increased size and influence could lead others to bolster their own efforts and merge together, allowing them to serve both the traditional and e-cigarette markets that vary in size around the world.

The deal is subject as well to regulatory approval and is expected to be completed sometime during the 2017 third quarter. (RAI) announced it has reached an agreement with British American Tobacco p.l.c. (BAT) where BAT will acquire the 57.8% of RAI common stock that BAT does not now own.

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