LONDON: British American Tobacco will take over Reynolds American Inc to create the world’s largest publicly traded tobacco company that would seek to capitalise on growing demand for electronic cigarettes in the US and traditional ones in developing countries.
BAT, which has a greater global footprint and already sells Dunhill, Rothmans and Lucky Strike cigarettes, is interested in Reynolds’ greater market share in the US, where use of e-cigarettes is growing fastest.
On the other hand, they would be able to market Reynolds’ brands like Newport, Camel and Pall Mall across a range of developing economies, where anti-smoking campaigns are not as strong as in the US and Europe.
“This is a big move, that makes a lot of sense for BAT,” said Steve Clayton, a fund manager for 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.”
BAT will pay about $49bn to buy the 57.8 per cent of Reynolds’ it doesn’t already own. Reynolds shareholders will receive for each share $29.44 in cash and 0.5260 BAT shares.
That values Reynolds, which is based in Winston Salem, North Carolina, at $59.64 per share, or $85bn in total.
“Our combination with Reynolds will benefit from utilising the best talent from both organisations,” BAT’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.”
Tobacco companies are particularly keen to expand sales of traditional cigarettes in developing countries to make up for weaker sales in Europe and the US.
Published in Dawn January 18th, 2017
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