London (AFP) - British American Tobacco agreed Tuesday to pay almost $50 billion for control of US peer Reynolds American in a move which targets the lucrative United States market and the fast-growing e-cigarette sector.

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

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

The transaction will also create the world's largest listed tobacco company with a strong foothold in the US, and a significant presence in high-growth markets including South America, the Middle East and Africa.

- E-cigarettes in focus -

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 Nicandro Durante in the statement.

He added that the blockbuster deal "will create a stronger, global tobacco 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 cash and 0.5260 BAT ordinary shares, under the terms of the transaction.

That represented an increase of 26 percent compared with the closing Reynolds share price on October 20 -- the day before BAT's unsuccessful bid.

The offer comprises $25 billion worth of BAT shares and $24.4 billion in cash 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 e-cigarette market -- where it is already the largest international company outside the US -- adding Reynolds' popular Vuse vapour brand to its portfolio.

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Major global tobacco companies 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.

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

Half of BAT's sales are in developed nations and the rest in emerging markets, while it claims to sell its cigarette brands to one in eight of the world's one billion smokers.

- Deal 'makes eminent sense' -

Shane MacGuill, head of tobacco at consultancy Euromonitor International, added that the deal was motivated by the lucrative US market.

âBAT and Reynolds American have a strong existing relationship and while cost savings will be relatively modest the full access this acquisition would give BAT to the US -- a lucrative, consolidated market with high barriers to entry -- meaning it makes eminent sense," said MacGuill.

"BAT will be inheriting full control of strong brands such as Newport, Camel and the super-premium Natural American Spirit.

"It will also gain the option to leverage Reynolds American's emerging product platform in world markets."

In morning London deals, BAT's share price added 0.24 percent to 4,774 pence on London's declining stock market.

The world's biggest cigarette producer by market share is the state-owned China National Tobacco Corporation, followed by Marlboro maker Philip Morris International.</s>British American Tobacco (BAT) raised its bid for Reynolds by 5.6% on Tuesday, turning the deal from a potentially hostile takeover into a friendly one.

The cash component of British American Tobacco’s offer has been lifted to $29.44 from $24.13, but the share component has been reduced to 0.5260 from 0.5502 British American Tobacco shares per Reynolds share.

British American Tobacco said this raised its bid to $59.64 from $56.50 per Reynolds share.

Reynolds’s share price rose 0.41% to $55.97 in New York while British American Tobacco rose 0.34% R784.99 on the JSE following the announcement.

British American Tobacco first announced its intention to buy the 57.8% of Reynolds it does not already own on October 21.

Its initial offer was reportedly rejected by Reynolds’s largest shareholders.

British American Tobacco said in Tuesday’s statement that the new offer was unanimously approved by a transaction committee of independent Reynolds directors.

At current share prices, British American Tobacco will pay $49.4bn to buy the remaining 57.8% of Reynolds.

Reasons given for the deal included "at least $400m of annualised cost synergies anticipated by the end of year three, supporting continued margin improvement".

"We have been shareholders in Reynolds since 2004 and we have benefited from the success of the present management team’s strategy, including its acquisition of Lorillard, which we supported with our own investment in 2015," British American Tobacco CEO Nicandro Durante said.

Reynolds was the second-largest player in the US market, with three out of the four top-selling cigarette brands, British American Tobacco said.

"Reynolds has a 34% 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. Reynolds’ American Snuff subsidiary also has a 33% share of the growing moist snuff segment, led by its Grizzly brand," the company said.</s>British American Tobacco has agreed the terms of a $49.4bn deal for control of US rival Reynolds, creating the largest listed tobacco firm. The UK company has been in talks with Reynolds for months about buying the 57.8% stake it does not already own.

Start the conversation, or Read more at BBC News.</s>British American Tobacco Plc has agreed to fully take over Reynolds American Inc. in a deal that will create the world's largest publicly traded tobacco company.

The $49 billion takeover was agreed on improved terms compared with an initial bid made last year. It would combine BAT's presence in developing countries, where anti-smoking campaigns are not as strong as in the U.S. and Europe, with Reynolds' almost exclusive focus on the U.S.

BAT sells Dunhill, Rothmans and Lucky Strike cigarettes, while Reynolds owns brands like Newport, Camel and Pall Mall.



 "Our combination with Reynolds will benefit from utilizing the best talent from both organizations," BAT's chief executive, Nicandro Durante, said in a statement Tuesday. "It will create a stronger, global tobacco and (next generation products) business with direct access for our products across the most attractive markets in the world."

London-headquartered BAT will buy the 57.8 percent of Reynolds it does not already own. Reynolds shareholders will receive for each share $29.44 in cash and 0.5260 BAT shares.

That values Reynolds, which is based in Winston Salem, North Carolina, at $59.64 per share, or $49.4 billion for the stake to be acquired, BAT says.

"This is a big move, that makes a lot of sense for BAT," said Steve Clayton, a fund manager a financial services firm Hargreaves Lansdown. "They already had billions tied up in Reynolds, now they will have billions more, but with full control of the company and its cash flows. The United States is an attractive market, with good pricing dynamics, and BAT can also take Reynolds' portfolio of new generation tobacco products and sell them worldwide."

Reynolds traces its roots to 1875, when Richard Joshua Reynolds started a chewing tobacco company in what was then Winston, North Carolina. The company's links with British American Tobacco date to 2004, when R.J. Reynolds Tobacco Co. merged with BAT's Brown & Williamson unit, creating Reynolds American. BAT was left with a 42 percent stake in the new company.

The two companies already have a technology-sharing agreement in the development of electronic cigarettes.</s>British American Tobacco PLC agreed to take full control of Reynolds American Inc. in a $49.4 billion deal that marks renewed interest among international players in the U.S. tobacco market.

BAT, which already owned 42.2% of Reynolds before Tuesday’s announcement, said it saw the U.S. as the largest tobacco profit pool outside of China—with affordable pack prices, high disposable income and a burgeoning market for e-cigarettes and...</s>British American Tobacco Plc (NYSEMKT: ) has agreed to acquire Reynolds American, Inc. (NYSE: ).

Two of the world’s largest tobacco companies are joining forces, creating a behemoth of a corporation that will include Camel, Lucky Strike, Newport, Kent and other brands under the same company.

The merger makes sense as traditional tobacco companies are facing a reduction in their business due to the rise of vaping and e-cigarettes. British American Tobacco already owned a stake of Reynolds American and initially offered $47 billion for the remaining 57.8% of the company.

The new company will be “stronger,” according to British American Tobacco CEO Nicandro Durante, who said the move will offer customers direct access to products from both companies. “We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future,” he added.

The combined company will result in annual savings of about $400 million. Reynolds American CEO Susan Cameron also praised the move as the new British American Tobacco will have a strong presence of traditional tobacco products, as well as vapor and tobacco-heating products.

Reynolds alone has a 34% of the cigarette share in the U.S., while the combined company has a large presence around the world, including the Middle East, South America, Africa and Asia.

BTI shares fell 2.1% Tuesday, while RAI stock gained 3% on the news.
• The 10 Best Contrarian Stocks to Buy in the New Year
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• 7 “New Industrial” Stocks to Bore You to the Bank</s>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.

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.</s>Tobacco giant British American Tobacco has today agreed a $49.4 billion takeover of US rival Reynolds American.

The deal will create the world's biggest listed tobacco company after it increased an earlier offer by more than $2 billion.

BAT, which already owned 42% of Reynolds, will pay $29.44 in cash and 0.5260 BAT shares for each Reynolds share, it said.

This marks a 26% premium over the price of the stock on October 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.

The deal values the whole of Reynolds at around $86 billion.

It will mark the return of BAT to the lucrative and highly regulated US market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets.

BAT's chief executive Nicandro Durante said bringing the two companies together would create a market leader with brands including Newport, Lucky Strike, Camel and Pall Mall.

"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," he said today.

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.

Durante said the combined group would have the largest global footprint of any tobacco group, with strong positions in both fast-growing emerging markets and lucrative Western countries.</s>It looks like the end of a months-long, will they-won’t they saga is finally drawing to a close: North-Carolina based R.J. Reynolds American has finally agreed to let British American Tobacco buy out the remaining part of the company it doesn’t already own for $49 billion.

The deal, the companies announced, will give British American full ownership of Reynolds, instead of just the 42.2% stake in the company it already owns.

British American first tried to buy out the rest of Reynolds in October of last year, offering $47 billion for the rest of the company. However, less than a month later Reynolds reportedly rejected that offer.

At the time, reports suggested that the two companies remained in negotiation, and that BAT would likely increase its offer slightly and try again. And while $2 billion is hardly pocket change to the likes of most of us, the jump from $47 billion to $49 billion is only about 4%, give or take. In other words, small potatoes for giant international corporations.

In a press release, BAT CEO Nicandro Durante said the merger “will create a stronger, global tobacco and N.G.P. business with direct access for our products across the most attractive markets in the world.”

He added, “We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future,” which is exactly the sort of thing that CEOs say.

That “NGP business” Durante referenced in his statement is likely the key to the whole deal. While cigarettes remain a lucrative item in some areas, increased legislation, taxation, and consumer education have changed their perception in developed nations like the U.S. and UK. But electronic cigarettes and the entire world of vaping and liquid nicotine are new and growing markets for existing Big Tobacco companies — including Reynolds, which sells the Vuse vaping system.

E-cigarettes are now subject to some FDA regulation, but still have experienced skyrocketing growth — especially among kids.

The tobacco industry, meanwhile, has been going through all kinds of contortions in recent years. Reynolds bought up competitor Lorillard in 2015, after agreeing to divest the Salem, Kool, and Winston brands. That merger made Reynolds a strong competitor to the top tobacco company in the U.S., Altria — probably best known to consumers as Philip Morris, the maker of Marlboros.

Now, it will be BAT competing with Altria both here and abroad — at least, provided the deal clears both companies’ boards and gains regulator approval.</s>British American Tobacco Plc has agreed to fully take over Reynolds American Inc. on terms that are improved from an initial bid made last year. The takeover would create the world's largest publicly traded tobacco company and combine BAT's presence in developing countries, where anti-smoking campaigns are not as strong as in the U.S. and Europe, with Reynolds' almost exclusive focus on the U.S. BAT said Tuesday it will buy the 57.8 percent of Reynolds it does not already own.

Start the conversation, or Read more at The Daily News-Record.
British American Tobacco agrees to take over the R. J. Reynolds Tobacco Company for $49.4 billion.