Today’s big deal
British American Tobacco (BAT) is eyeing to fully acquire Reynolds American in a $47bn (£38.4bn) deal.
BAT already owns 42.2 per cent of Reynolds and has offered to acquire the remaining 57.8 per cent at $56.50 per share.
“We have been a shareholder in Reynolds since its creation in 2004 and have benefited from its growth in the US market,” said BAT chief executive Nicandro Durante.
“The proposed merger of our two great companies is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and next generation products company.
“BAT is proud of its track record of consistent delivery for shareholders and this transaction would further strengthen that delivery in the future.”
Nigel Driffield, professor of international business, Warwick Business School: “The planned takeover of Reynolds by BAT represents the final step of a process that the two companies embarked on some time ago. The markets in which these firms are the dominant players are declining, and they face ever increasing competition from Asia in seeking to develop new markets. This merger will therefore lead to further rationalisation of both RJR and BAT, and give complete access to RJR’s US production facilities for BAT.
“This is likely to lead to increased production of BAT’s UK brands in the US, with fewer exports to the US from the UK. Demand in the US and UK markets has been declining for some time, with increased use of substitute products including e-cigarettes.
“For some time now US and UK tobacco firms have come under pressure at home from health groups as they seek new markets, and they face increased market penetration from Asian and European firms who receive less adverse comment at home for seeking to expand into developing countries. This merger is therefore the next stage in moves to reduce the cost base in the UK and US.”