- Title: BAT agrees to buy Reynolds for $49 billion
- Date: 17th January 2017
- Summary: LONDON, ENGLAND, UNITED KINGDOM (JANUARY 17, 2017) (REUTERS) SOUNDBITE (English) JAMES BEVAN, CHIEF INVESTMENT OFFICER, CCLA, SAYING: "I think it's surprisingly easy for tobacco companies to generate sales so long as they understand what the customers are looking for. And I would say there are three drivers of the benefits observable in the United States. First there is relatively low pricing. Secondly there is a shift in the technology which means that people perceive that they can have the benefits as they perceive of smoking but without the disbenefits of ill health. And thirdly there is an expectation of reduced litigation risk."
- Embargoed: 31st January 2017 10:41
- Keywords: BAT tobacco Reynolds smoking merger M&A cigarettes vaping e-cigarette
- Location: LONDON, ENGLAND, UK / UNKNOWN LOCATION
- City: LONDON, ENGLAND, UK / UNKNOWN LOCATION
- Country: United Kingdom
- Topics: Company News Markets,Economic Events
- Reuters ID: LVA0045ZGYFT9
- Aspect Ratio: 16:9
- Story Text:British American Tobacco has agreed a $49.4 billion takeover of U.S. rival Reynolds American Inc, creating the world's biggest listed tobacco company after it increased an earlier offer by more than $2 billion.
BAT, which already owned 42 percent of Reynolds, will pay $29.44 in cash and 0.5260 BAT shares for each Reynolds share, it said, a 26 percent premium over the price of the stock on Oct. 20, the day before BAT's first offer was made public.
Reynolds, the maker of Camel and Newport cigarettes, rejected the approach a month later, according to sources, although the two sides remained in talks.
"In October, Reynolds said that it wasn't against a deal, that it was not comfortable that the price was adequately full. The price move up from last October is modest in the context of overall market movements since that date. But nevertheless, it is a position that BAT can argue is ultimately supportive of shareholder value for both the shareholders coming in and BAT's existing shareholders. And that relates to a substantially enhanced position in the global tobacco business. For BAT that means more in the United States. It also means BAT gets its hands on some of the technology that Reynolds has in terms of heating and not burning tobacco, which is an important part of the future industrial logic," James Bevan, Chief Investment officer at CCLA, said.
The deal, which values the whole of Reynolds at around $86 billion, will mark the return of BAT to the lucrative and highly regulated U.S. market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets.
Analysts have said the takeover could spark further deals as Philip Morris International and Japan Tobacco jostle for market share in an industry that is shrinking in the West as more people quit smoking.
"I think it's surprisingly easy for tobacco companies to generate sales so long as they understand what the customers are looking for. And I would say there are three drivers of the benefits observable in the United States. First there is relatively low pricing. Secondly there is a shift in the technology which means that people perceive that they can have the benefits as they perceive of smoking but without the disbenefits of ill health. And thirdly there is an expectation of reduced litigation risk," Bevan said. - Copyright Holder: REUTERS
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