Two of the world’s most prominent tobacco companies have agreed a merger, in a $49.4 billion deal that will create the largest listed tobacco firm.
British American Tobacco (BAT) have agreed the terms of a recommended offer to acquire the remaining 57.8 percent of US company Reynolds it does not already own. UK-based BAT have been trying to buy Reynolds for some months, after an initial offer made in November was rejected.
BAT said the move will give them a “balanced presence in high growth emerging markets and high profitability developed markets, combined with direct access to the attractive US market”, as well as a “portfolio of strong, growing global brands, bringing together ownership of Newport, Kent and Pall Mall”.
BAT’s Chief Executive Nicandro Durante said he was “very pleased to have reached an agreement with the Transaction Committee and Board of Reynolds”.
He added that: “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.
“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. We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future.”
Reynolds is the second-largest tobacco company in the US and recently completed a $25 billion takeover of US rival Lorillard.
The offer comprises $25 billion worth of BAT shares and $24.4 billion in cash, valuing the whole Reynolds business at more than $85 billion.
Shares is British American Tobacco (LON:BATS) are trading largely flat, up 0.08 percent at 4,762.00 with Reynolds (NYSE:RAI) up 0.41 percent (0920GMT).