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Tobacco giant BAT buys out US firm Reynolds for $49.4bn

BAT will purchase the 57.8% of Reynolds American that it does not already own

AFP | PTI  |  London 

Cigarette, Tobacco, BAT
Pall Mall cigarettes are seen after the manufacturing process in the British American Tobacco Cigarette Factory (BAT) in Bayreuth, southern Germany. Photo: Reuters

British American agreed on Monday to pay almost $50 billion for control of US firm Reynolds American, creating the world's largest listed company.

will purchase the 57.8-per cent of Reynolds American that it does not already own, said, unveiling an improved cash-and-offer after the US giant had rejected its previous $47-billion bid.

The deal brings together a raft of global brands, including products Lucky Strike, Rothmans and Kent, and Reynolds' brands such as Newport, Camel and Pall Mall.

The combined company will have a strong foothold in the United States, and a significant presence in high-growth markets including South America, the Middle East and

BAT added it would also create a "truly global" business for fast-growing next generation products (NGP) like e-cigarettes or vaping.

"We are very pleased to have reached an agreement with ... Reynolds and we look forward to putting the recommended offer to shareholders," said BAT Chief Executive in a statement.

He added that the blockbuster deal "will create a stronger, global and NGP business with direct access for our products across the most attractive markets in the world".

"We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future."

Reynolds shareholders will receive $29.44 in and 0.5260 BAT ordinary shares, under the terms of the transaction.

That represented an increase of 26 per cent compared with the closing Reynolds share price on October 20 — the day before BAT's unsuccesful bid.

The offer comprises $25 billion worth of BAT and $24.4 billion in and values the entire Reynolds group at more than $85 billion.

BAT forecasts that it will make at least $400 million in annualised cost savings following the purchase, while the deal remains subject to shareholder and regulatory approvals.

The London-listed firm plans to expand further in the vaping and e-cigarette market — where it is already the largest company outside the US — adding Reynolds' popular Vuse vapour brand to its portfolio.

Major global tobacco are smoking out emerging markets to offset sliding demand in Western Europe, where high taxes, public smoking bans and health worries have persuaded many people to give up or turn to e-cigarettes, battery-powered devices that heat a nicotine liquid.

The world's biggest cigarette producer by market share is the state-owned China National Tobacco Corporation, followed by Marlboro maker Philip Morris

However, BAT says the Reynolds deal will create the biggest listed tobacco firm by net turnover and operating profit.

Reynolds is the second biggest player in the US market and has three out of the four top-selling cigarette brands.

First Published: Tue, January 17 2017. 16:16 IST