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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 Oct. 20, the
day before BAT's first offer was made public.
Reynolds, the maker of Camel and Newport cigarettes, rejected
the approach a month later, according to sources, although the
two sides remained in talks.
The deal, which values the whole of Reynolds at around $86
billion, will 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.
BAT Chief Executive Nicandro Durante said bringing the two
companies together would create a market leader with brands
including Newport, Lucky Strike, Camel and Pall Mall.
"It will create a stronger, global tobacco and NGP (next
generation products) business with direct access for our
products across the most attractive markets in the world," he
said on Tuesday.
Analysts have said the takeover could spark further deals as
Philip Morris International <PM.N> and Japan Tobacco <2914.T>
jostle for market share in an industry that is shrinking in the
West as more people quit smoking.
Durante said the combined group would have the largest global
footprint of any tobacco group, with strong positions in both
fast-growing emerging markets and lucrative Western countries.
RBC Capital Markets said assuming BAT was able to achieve the
annual cost savings of "at least $400 million" it has targeted,
the deal would be financially neutral for BAT shares.
"We think (the deal) makes sense strategically and operationally
and just about washes its face financially," it said. "That
said, a value-neutral acquisition does little to alter our view
that the shares are already reasonably valued."
Shares in BAT were up 0.4 percent at 47.80 pounds at 0855 GMT,
about where they were trading in October before the company
revealed its initial bid.
Centerview Partners, Deutsche Bank and UBS advised BAT on the
deal, while Lazard, JP Morgan and Jones Day worked for Reynolds
American.
(Reporting by Paul Sandle; Editing by Kate Holton and Mark
Potter)
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