BAT inhaling all of Reynolds in $49.4bn deal

British American Tobacco took the plastic film off another industry consolidation effort on Tuesday, announcing it was buying the 57.8% of Reynolds American it doesn’t already own in an agreed cash-and-shares offer worth $49.4bn.

British American Tobacco

2,695.00p

17:15 31/10/24

1.77%

47.00p

FTSE 100

8,110.10

17:09 31/10/24

n/a

FTSE 350

4,473.68

17:14 31/10/24

n/a

FTSE All-Share

4,431.83

17:09 31/10/24

n/a

Tobacco

31,583.83

17:14 31/10/24

1.68%

522.46

The FTSE 100 company said the deal has been unanimously approved by the transaction committee of independent Reynolds directors established to evaluate the BAT offer, and by the boards of Reynolds and BAT.

Under the offer, Reynolds shareholders will receive $29.44 in cash and 0.5260 BAT ordinary shares for each Reynolds share, with the BAT shares represented by American Depository Receipts listed on the New York Stock Exchange.

Based on BAT's share price and the dollar-sterling exchange rate as at market close on 16 January, the figures imply a total current value of $59.64 per Reynolds share and a total current value of approximately $49.4bn for the 57.8% of Reynolds not already owned by BAT.

It also represents a premium of 26% over the closing price of Reynolds common stock on 20 October 2016, being the last day prior to BAT's announcement of a proposal to merge with Reynolds, according to the board of BAT.

NYSE-listed Level III ADRs representing BAT ordinary shares will be issued following registration under US securities laws, it confirmed.

“We are very pleased to have reached an agreement with the transaction committee and board of Reynolds and we look forward to putting the recommended offer to shareholders,” said British American Tobacco chief executive Nicandro Durante.

“We have been shareholders in Reynolds since 2004 and we have benefited from the success of the present management team's strategy, including its acquisition of Lorillard, which we supported with our own investment in 2015.”

Durante said BAT has consistently executed a “winning strategy” and has a proven track record of delivering strong results and returns for its shareholders while successfully investing for future growth.

“Our combination with Reynolds will benefit from utilising the best talent from both organisations.

“It will create a stronger, global tobacco and NGP business with direct access for our products across the most attractive markets in the world,” Durante explained.

“We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future.”