Published: Wed, January 18, 2017
Economy | By Melissa Porter

BAT Agrees to Pay $49.4 Billion to Buy Out Reynolds American

BAT, which already owned 42 percent of Reynolds, will pay $29.44 in cash and 0.5260 BAT shares for each Reynolds share, it said, a 26 percent premium over the price of the stock on October 20, the day before BAT's first offer was made public.

After years of distancing themselves from the USA because of mounting civil suits, worldwide tobacco companies are returning as they confront declining cigarette volumes and expanding regulations around the globe. It would make British American Tobacco PLC (LON:BATS) the only leading tobacco business in both the worldwide and the American markets.

BAT, a shareholder in Reynolds since 2004, said a year ago that the merger was "the logical progression in our relationship".

Commenting on the deal, BAT chief executive Nicandro Durante said: "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". Equating to a total value, based on Monday's exchange rate between the dollar and pound, $59.64 a share, a total value of $49.4 billion.

WARNING: "Brokerages Set Reynolds American Inc (RAI) Price Target at $56.29" was originally published by Community Financial News and is owned by of Community Financial News. Its Camel brand was introduced in 1913. The Company's brands include Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans. This time, BAT increased their offer price by $2 billion, and Reynolds finally budged. The company has 4,000 employees. and is the No. 2 cigarette maker in the United States behind Philip Morris. 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.

BAT would also be able to take Reynold's NGP portfolio, led by vaping brand Vuse, into its global markets, he said.

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. It generated $6.2 billion adjusted profit in 2015. It is still subject to approval by shareholders and regulators and, in the event of a break-up, could trigger a $1 billion fee.

Reynolds American Inc. (NYSE:RAI) went up 0.41% during trading on 01/13/2017, closing at $55.97. BAT might be required to pay a $500 million breakup fee if there are antitrust authorities.

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