LONDON -- British American Tobacco Plc has agreed to fully take over Reynolds American Inc. in a deal to create the world's largest publicly traded tobacco company.
The $49.4 billion deal is larger than the initial bid made last year. It would combine British American Tobacco's presence in developing countries, where anti-smoking campaigns are not as strong as in the U.S. and Europe, with Reynolds' almost exclusive focus on the U.S.
British American Tobacco sells Dunhill, Rothmans and Lucky Strike cigarettes, while Reynolds owns the Newport, Camel and Pall Mall brands.
"Our combination with Reynolds will benefit from utilizing the best talent from both organizations," British American Tobacco's chief executive, Nicandro Durante, said in a statement Tuesday. "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."
London-based British American Tobacco will buy the 57.8 percent of Reynolds it does not already own. Reynolds shareholders will receive for each share $29.44 in cash and about half a share in British American Tobacco.
That values Reynolds, which is based in Winston-Salem, N.C., at $59.64 per share, or $49.4 billion for the stake that would be acquired, British American Tobacco said.
"This is a big move that makes a lot of sense for [British American Tobacco]," said Steve Clayton, a fund manager at 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. The United States is an attractive market, with good pricing dynamics, and [British American Tobacco] can also take Reynolds' portfolio of new generation tobacco products and sell them worldwide."
Reynolds traces its roots to 1875, when Richard Joshua Reynolds started a chewing tobacco company in what was then Winston, N.C. 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. British American Tobacco was left with a 42 percent stake in the new company.
Negotiating was a slow process for the cigarette-makers, complicated by uncertainty created by Donald Trump's presidential election victory. With an agreement in place, the companies can move forward with a combination that marks the latest stage in a wave of consolidation for the industry.
Information for this article was contributed by Thomas Mulier and Sam Chambers of Bloomberg News.
Business on 01/18/2017