British American Tobacco to buy Reynolds American for $48B

Jan. 17 (UPI) -- British American Tobacco announced it will buy out other Reynolds American shareholders for $48 billion, taking full control of the company and creating the world's largest publicly traded tobacco company.

Three months ago, BAT offered to buy the remainder of Reynolds American for $47 billion. The deal values Reynolds American at $79.8 billion, based on market capitalization, and BAT at $107.4 billion.

"It will create a stronger, global tobacco and NGP [Next Generation Products] business with direct access for our products across the most attractive markets in the world," Nicandro Durante, the BAT chief executive, said in a news release. "We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future."

The London company has been a part owner of Reynolds since 2004.

"We look forward to bringing together the two companies' highly complementary cultures and shared commitment to innovation and transformation in our industry," Debra A. Crew, the Reynolds American president and chief executive, said in a news release. "British American Tobacco is the best partner for Reynolds American's next phase of growth, and together the two companies will create the leading portfolio of tobacco and next-generation products for adult tobacco consumers."

British American Tobacco, based in London, would pay $59.64 a share for Reynolds American -- a 26 percent premium over the company's closing price before the initial offer.

Reynolds, with headquarters in Winston-Salem, N.C., has a 34 percent cigarette market share, with Newport the leading brand in menthol; Pall Mall the leading value brand and Natural American Spirit the fastest-growing premium brand, according to the company. Reynolds' American Snuff subsidiary also has a 33 percent share of the growing moist snuff segment, led by Grizzly. Its Camel brand was introduced in 1913.

BAT's brands include Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans.

Reynolds had before-tax profits of $6.4 billion in 2015. The company has 4,000 employees. and is the No. 2 cigarette maker in the United States behind Philip Morris.

BAT employs more than 50,000 people worldwide and has more than 200 brands in its portfolio. It generated $6.2 billion adjusted profit in 2015.

More than a decade ago, British American Tobacco merged its Brown & Williamson operations in the United States with R.J. Reynolds.

BAT shares were down 0.3 percent to $57.25 in Tuesday trading in London after rising earlier. Reynolds shares were up 4 percent to $55.97 in pre-market trading in the United States.

The deal is subject to $1 billion breakup by either company should its board fail to recommend the transaction to shareholders or withdraw its recommendation. BAT might be required to pay a $500 million breakup fee if there are antitrust authorities.