BAT Proposes Merger with Reynolds
Is the tobacco sum greater than its parts? BAT bets it is.
British American Tobacco, which owns 42.2 percent of Reynolds American Inc., has made a proposal to merge with Reynolds through the acquisition of the remaining 57.8 percent in the company.
It was reported in Reuters that this would 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.
It would also give the British company more premium brands such as Camel, which it can sell in countries like Russia and Turkey where demand for Western cigarettes is still growing, according to Reuters.
The union would also merge each company's efforts in the fast-moving vapor/e-cig arena.
According to BAT, the merger would create a stronger, truly global tobacco and Next Generation Products (NGP) company with:
Ultimately, it would create the world’s largest listed tobacco company by net turnover and operating profit, BAT added.
BAT’s CEO Nicandro Durante pointed out that as a shareholder in Reynolds since its creation in 2004, the British tobacco giant has benefited from its growth in the US market. The acquisition of Lorillard in 2015 has further strengthened Reynolds’s business, he observed. He said that the proposed merger of the two companies is the logical progression in its relationship; perhaps the inevitable wave of global consolidation in such a mature industry, as some observers have put it.
The completion of last year's purchase by Reynolds of Lorillard and the current relative valuations of the two companies' shares were the main triggers, two sources close to the situation told Reuters.
But others see an element of surprise in it.
"This proposed deal manages to be both entirely expected and a surprise," Euromonitor analyst Shane MacGuill told Reuters.
The proposed merger is subject to endorsement of Reynolds’s independent directors (not designated by BAT) and approval by BAT and Reynolds shareholders.
British American Tobacco, which owns 42.2 percent of Reynolds American Inc., has made a proposal to merge with Reynolds through the acquisition of the remaining 57.8 percent in the company.
It was reported in Reuters that this would 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.
It would also give the British company more premium brands such as Camel, which it can sell in countries like Russia and Turkey where demand for Western cigarettes is still growing, according to Reuters.
The union would also merge each company's efforts in the fast-moving vapor/e-cig arena.
According to BAT, the merger would create a stronger, truly global tobacco and Next Generation Products (NGP) company with:
- A leading position in the US tobacco market, the largest global profit pool (ex-China) with strong growth dynamics
- A significant presence in high-growth emerging markets across South America, Africa, the Middle East and Asia, together with the most attractive developed markets
- A unique portfolio of strong brands, bringing together ownership of Newport, Kent and Pall Mall
- Combined NGP and R&D capabilities to deliver a world-class pipeline of vapor and tobacco heating products across all the fastest growing NGP markets globally.
Ultimately, it would create the world’s largest listed tobacco company by net turnover and operating profit, BAT added.
BAT’s CEO Nicandro Durante pointed out that as a shareholder in Reynolds since its creation in 2004, the British tobacco giant has benefited from its growth in the US market. The acquisition of Lorillard in 2015 has further strengthened Reynolds’s business, he observed. He said that the proposed merger of the two companies is the logical progression in its relationship; perhaps the inevitable wave of global consolidation in such a mature industry, as some observers have put it.
The completion of last year's purchase by Reynolds of Lorillard and the current relative valuations of the two companies' shares were the main triggers, two sources close to the situation told Reuters.
But others see an element of surprise in it.
"This proposed deal manages to be both entirely expected and a surprise," Euromonitor analyst Shane MacGuill told Reuters.
The proposed merger is subject to endorsement of Reynolds’s independent directors (not designated by BAT) and approval by BAT and Reynolds shareholders.