After being in discussion for months, British American Tobacco (BAT), and Reynolds American, have agreed on a price for the merger that will create the world’s largest big tobacco company.
The British company which has been a Reynolds shareholder for over a decade, said that the acquisition of this 57.8% of the stake, ”creates a stronger, truly global tobacco” business, adding, that this was “the logical progression in our relationship”.
On the 20th of last October, BAT, who is the second-largest tobacco manufacturer in the United States, sent an acquisition proposal to RAI. This comprised of an offer of $20 billion in cash and about $47 billion in shares, for the acquisition of the remaining 57.8% in the company.
Now that the deal has been concluded, this merger is expected to save BAT $400 million, whilst bringing together some of the most popular cigarette brands such as Lucky Strike, Rothmans, Dunhill and Camel cigarettes.
The UK company which has also been extensively branching out to vaping products, owns over 200 brands, and last November even purchased major Polish vaping company, Chic, in a move that will ensure its presence in Eastern Europe. Subsequently the takeover of Reynolds will now also guarantee its presence in South America, the Middle East and Africa.
The creation of the world’s largest tobacco company
“Our combination with Reynolds will benefit from utilising the best talent from both organisations. It will create a stronger, global tobacco and NGP [new-generation products] business with direct access for our products across the most attractive markets in the world.” said BAT’s chief executive, Nicandro Durante.
While fund manager at Hargreaves Lansdown, Steve Clayton, said this was a big move that made sense, adding, “The sheer scale of the enlarged BAT raises the pressure on the remaining players to bulk up too, and attention is likely to turn to Imperial Brands, who look more and more like a minnow swimming in a tank of big, hungry fish.”