British American Tobacco has acquired the remaining 57.8% share of Reynolds American Inc. it does note own. The transaction is valued at approximately 49.4 billion dollars. The acquisition now results in British America Tobacco being the largest tobacco company in the world. The transaction has been approved by the boards of both companies. Assuming shareholders approve the transaction, it is expected to officially close in the third quarter of 2017.
British American Tobacco already owned a 42.2% share of Reynolds American. Back in October, the British American Tobacco had announced its intent to acquire the remaining shares of Reynolds did not own. Reynolds American had rejected the 47 billion dollar offer, but insiders had felt the two tobacco giants were still in negotiations.
British American Tobacco owns the Dunhill brand, a premium cigar line distributed in the U.S. by Scandinavian Tobacco Group. The company also owns cigarette brands Kent, Lucky Strike, and Pall Mall.
Based in Winston Salem, North Carolina; Reynolds American does play in the premium hand-made space, it does own Santa Fe Natural Tobacco Company, a brand known for Spirit Cigarettes, “roll your own products”, and some machine-made cigars. Former U.S. Speaker of the House of Representatives John Boehner had recently joining Reynolds American on the board of directors.
In a press release announcing the closing of the transaction, British American Tobacco Chief Executive, Nicandro Durante commented: “We are very pleased to have reached an agreement with the Transaction Committee and Board of Reynolds and we look forward to putting the recommended offer to shareholders. 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. BAT has consistently executed a winning strategy and has a proven track record of delivering strong results and returns for its shareholders while successfully investing for future growth. Our combination with Reynolds will benefit from utilising the best talent from both organisations. It 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.”
It has been agreed that three of the non-British American Tobacco nominated Reynolds directors will join the Board of British American Tobacco at closing.
British American Tobacco says the acquisition gives the company a stronger position in the U.S. market, by which Reynolds was the #2 player.Reynolds group also has production facilities in North Carolina and Tennessee, but most are focused on the cigarette market.
British American Tobacco owns the Dunhill brand, a premium cigar line distributed in the U.S. by Scandinavian Tobacco Group. The company also owns cigarette brands Kent, Lucky Strike, and Pall Mall.
Based in Winston Salem, North Carolina; Reynolds American does play in the premium hand-made space, it does own Santa Fe Natural Tobacco Company, a brand known for Spirit Cigarettes, “roll your own products”, and some machine-made cigars. Former U.S. Speaker of the House of Representatives John Boehner had recently joining Reynolds American on the board of directors.
With U.S. Food and Drug Administration regulations now targeted at the smaller premium hand-made cigar industry and electronic cigarettes, the creation of a new tobacco giant creates an environment that strengthens big tobacco. With the regulations weakening smaller cigar companies financially, it could make many of these companies potential targets to be acquired by the much larger “big tobacco” (i.e. cigarette) companies. A merged British American Tobacco-Reynolds American conglomeration strengthens its position to look at the premium hand-made cigar industry as a potential target. This has been seen today as Altria acquired Nat Sherman.
