BAT proposes merger with Reynolds

British American Tobacco plc (BAT), which owns 42.2% of Reynolds American Inc (Reynolds), has made a proposal to merge with Reynolds through the acquisition of the remaining 57.8% in the company. US securities laws require BAT to announce its merger proposal promptly after it was made to the Board of Reynolds. As a result, BAT has been unable to have prior negotiations with Reynolds regarding the proposal.
BAT’s proposal to merge with Reynolds:
– Values Reynolds at $56.50 per share, of which $24.13 would be in cash and $32.37 would be in BAT shares.
– Represents a premium of 20% over the closing price of Reynolds common stock on 20 October 2016.
This 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 Next Generation Products and R&D capabilities to deliver a world class pipeline of vapour and tobacco heating products across all the fastest growing NGP markets globally.
– Creating the world’s largest listed tobacco company by net turnover and operating profit.
BAT’s Chief Executive, Nicandro Durante, commented: “We have been a shareholder in Reynolds since its creation in 2004 and have benefited from its growth in the US market. The acquisition of Lorillard in 2015 has further strengthened Reynolds’s business. The proposed merger of our two great companies is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and Next Generation Products company. BAT is proud of its track record of consistent delivery for shareholders and this transaction would further strengthen that delivery in the future.”