BAT Agrees to Pay $49 Billion to Take Full Control of Reynolds -- 2nd Update
January 17 2017 - 3:43AM
Dow Jones News
By Ian Walker
LONDON-- British American Tobacco PLC and Reynolds American Inc.
on Tuesday said they had agreed to a sweetened offer of $49.4
billion from BAT for the 57.8% of Reynolds that it doesn't already
own, a deal that will create the world's largest listed tobacco
company by revenue and market value.
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. 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.
BAT shares were up 1% to GBP48.11 ($58.31) in early Tuesday
trading in London.
The British firm, which houses Dunhill, Lucky Strike and Pall
Mall among its brands, expects at least $400 million in 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 03:28 ET (08:28 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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