BAT takes over Reynolds for $49.4 billion to create world’s largest tobacco company

Company - Himanshu Gill - Jan 17,2017

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bat takes over reynolds for 49 4 billion to create world s largest tobacco company

British American Tobacco (BAT) has agreed to buy full control of its US rival firm Reynolds for $49.4 billion to create the world’s largest listed tobacco firm.

BAT, owner of brands like Dunhill and Lucky Strike, had initially made an unsolicited offer of $47 billion to acquire a remaining 57.8 percent stake in Reynolds in October last year (it already owns rest of the stake). The new offer nudged by $2 billion, valued each of Reynolds share at $59.64. In October it had proposed the value of each share at $56.50.

The merger is set to bring together some of the tobacco industry’s best and biggest brands like Rothmans, Dunhill, Lucky Strike and Camel cigarettes. BAT has been a shareholder in Reynolds since 2004 and called this merger a “logical progression” in the two companies’ relationship.

BAT estimates that it can save up to $400 million a year through this merger. Reynolds is a legendary tobacco company and has been operating since 1875. It is the second largest tobacco company in the US after Altria, which owns Philip Morris USA.

The deal, once approved by shareholders and regulatory bodies, will bring BAT back into the US market after more than a decade. Its earlier US subsidiary Brown & Williamson was merged into Reynolds in exchange for a large minority stake.

Reynolds took over its US rival Lorillard for $25 billion last year and this combined company was forced to sell a number of brands like Kool, Salem and Winston to satisfy the regulators. Among its major brands are Newport, Camel, Pall Mall, Doral, Misty and Capri.

BAT has more than 200 brands worldwide at the moment, and is the biggest player in the market of e-cigarettes. This takeover will further boost its growth in significant markets like South America, Middle East and Africa.