Tobacco giant BAT bids $47 billion for control of US producer Reynolds.
British American Tobacco which dominates the tobacco industry in most parts of Asia, said on Friday it had launched a $ 47 billion bid for control of rival Reynolds American, eying rapid expansion into the US and emerging markets and e-cigarettes.
The deal would constitute the world’s largest listed tobacco company by net turnover and operating profit, BAT said in a statement.
BAT stated the move would give it “a leading position in the US tobacco market” and “a vital presence in high growth emerging markets across South America, Africa, the Middle East, and Asia, together with the most attractive developed markets.”
Creating a monopoly in the industry this blockbuster proposal would bring together BAT trademark brands Dunhill, Kent and Lucky Strike cigarettes with Reynolds American’s Camel and Newport.
A BAT spokesperson announced, “The combined group would have a world class pipeline of so-called next generation products, like e-cigarettes, in a fast-growing part of the market.”
This cash-and-shares proposal would see BAT purchase the 57.8-percent of Reynolds American that it does not already own.
The bid, pitched at $56.50 per Reynolds share, was a 20-percent premium on Thursday’s close and comprises $20 billion in cash and $27 billion in BAT shares.
Reynolds is appraised at around $93 billion. BAT which is listed on the London Stock Exchange noted that Reynolds’ 2015 purchase of US tobacco behemoth Lorillard, the manufacturer of the Blu e-cigarette, had “strengthened” the US group.
Most global tobacco firms are trying to expand to emerging markets to compensate for slipping demands in Western Europe, where high taxes, public smoking bans, coupled with health concerns have convinced many people to quit smoking.
At the same time, in recent years there has been accelerated growth in e-cigarettes, which are battery-powered devices that heat a nicotine liquid.
BAT chief executive Nicandro Durante stated that the planned merger of two companies is the reasonable progression in the relationship and offers all shareholders a stake in a reliable, truly global tobacco and Next Generation Products company. BAT is proud of its track record of steady delivery for shareholders, and this transaction would further strengthen that commitment in the future.
The British firm, which already possesses a 42.2-percent stake in Reynolds American, continued that it had not yet held formal talks. Due to US securities laws, BAT was obliged to announce its proposal promptly after it was made to Reynolds management, and had therefore been unable to have prior negotiations concerning the deal.
Worldwide, smoking claims around six million lives annually, mostly in low-income countries, according to the World Health Organization. It is the top preventable cause of cancer.
($1 = ৳78.47)