British American Tobacco Acquires Most of Reynolds American’s Shares (Illustrated)
On October 21, British American Tobacco (BAT) announced that it has made an offer of $4.7 billion for the 58% of Reynolds American that it does not already own. Although Brexit has put pressure on some UK companies, BAT has not been affected as most of its revenue comes from overseas. Many investors expect the deal to proceed, although BAT may raise its offer. BAT will become the world's largest tobacco company by sales and profit value.
In fact, British American Tobacco already owns 42% of Reynolds American's shares, and if this acquisition goes through, BAT will fully acquire the American company. Following this news, stocks of several American tobacco companies saw varying degrees of increase on the same day.
The bombshell news is that BAT's brands, including Dunhill, Kent, and Lucky Strike cigarettes, will merge with Reynolds American's Camel and Newport brands.
The merged group will become a "world-class pipeline" for new generation products (such as e-cigarettes) under rapid market growth.
Most global tobacco companies are seeking emerging markets to offset declining demand in Western Europe, where high taxes, public smoking bans, and health concerns have led many to give up cigarettes or switch to battery-powered devices that heat nicotine liquid.
Big data analyst Shane MacGill stated: "This acquisition could provide BAT with a lucrative, integrated, high-barrier American market, which is significant."
