British American Tobacco announced last week that it had offered to buy out U.S. cigarette maker Reynolds American Inc in a US$47 billion takeover bid. BAT currently owns 42.2% of Reynolds American Inc. The British company has now offered cash and stock worth $56.50 a share for the 57.8% of Reynolds it doesn’t already own.
The offer represents a premium of 20% over the closing price of Reynolds common stock on October 20, 2016.
If the deal goes ahead, BAT says that it will create the world’s largest listed tobacco company by net turnover and operating profit, and give the company a leading position in the U.S. tobacco market, the largest global profit pool (ex-China) with strong growth dynamics.
The acquisition will also give BAT a significant presence in high growth emerging markets across South America, Africa, the Middle East and Asia, together with the most attractive developed markets, and a unique portfolio of strong brands, bringing together owner-ship of Newport, Kent and Pall Mall.
The deal will also result in a combined Next Generation Products and R&D capabilities to deliver a world class pipeline of vapour and tobacco heating products across all the fastest growing NGP markets globally, says BAT.
According to published reports, Winston-Salem, North Carolina based Reynolds acknowledged receipt of the unsolicited offer and said it would review the offer and respond in due course.
Reynolds American was formed in 2004 when BAT merged its U.S. subsidiary Brown & Williamson with R.J. Reynolds.