BAT offers to buy U.S. tobacco firm Reynolds in $47 billion deal

Fri Oct 21, 2016 3:41pm EDT
 
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By Martinne Geller, Paul Sandle and Pamela Barbaglia

LONDON (Reuters) - British American Tobacco (BATS.L: Quote) has offered to buy out U.S. cigarette maker Reynolds American Inc (RAI.N: Quote) in a $47 billion takeover that would create the world's biggest listed tobacco company with brands including Newport, Lucky Strike and Pall Mall.

The cash-and-stock deal 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 - which has been bolstered by a strong share price since the country voted to leave the European Union - more premium brands such as Camel which it can sell in countries like Russia and Turkey where demand for Western cigarettes is still growing.

The marriage would also unite each company's efforts in the fast-developing world of e-cigarettes, which the companies say are less dangerous than smoking - a habit that kills about six million people worldwide each year.

BAT shares closed down almost 2.9 percent, while Reynolds was up almost 7 percent in afternoon trading in New York.

Morningstar analyst Adam Fleck said the BAT decline could be because "the price looks rich to us."

"Our take is that it is a little bit over valued," he said.

Moody’s also said Friday it is reviewing BAT's A3 ratings for a possible downgrade.   Continued...

 
People walk past the British American Tobacco offices in London, Britain October 21, 2016. REUTERS/Stefan Wermuth