BAT Agrees to Pay $49 Billion to Take Full Control of Reynolds -- Update
January 17 2017 - 3:09AM
Dow Jones News
By Ian Walker
LONDON-- British American Tobacco PLC on Tuesday said it had
agreed to pay $49.4 billion for the 57.8% of Reynolds American Inc.
that it doesn't already own.
BAT is paying $29.44 in cash and 0.5260 of an ordinary share for
each Reynolds' share, valuing its U.S. peer at more than $85
billion, and creating the world's largest listed tobacco company by
revenue and market value.
The deal comes after BAT said in October that it had made an
offer for Reynolds valued at $56.50 a share, or about $47 billion
for the stake it didn't own. Tuesday's agreed price represents a
premium of 26% over the closing price of Reynolds the day before
BAT made its initial announcement last year.
The British firm, which houses Dunhill, Lucky Strike and Pall
Mall among its brands, expects at least $400 million cost savings
from the deal, which is expected to benefit both earnings and
dividends in the first year.
BAT has been a shareholder in Reynolds since the U.S. firm took
on its current form in 2004, and its stake accounts for a hefty
chunk of BAT's profits.
The deal is the latest transaction to highlight the value the
U.S. holds for a shrinking global tobacco industry.
After years of distancing themselves from the U.S. because of
mounting civil suits, international tobacco companies are returning
as they confront declining cigarette volumes and expanding
regulations around the globe.
Beyond tobacco, a combined BAT and Reynolds will also be the
world's largest player in so-called next-generation
products--largely e-cigarettes and other vaping products.
Write to Ian Walker at ian.walker@wsj.com
(END) Dow Jones Newswires
January 17, 2017 02:54 ET (07:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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