British American Tobacco and Reynolds American merge to create largest publicly traded tobacco company

Fewer Americans are smoking cigarettes, especially in public where it has nearly been banned everywhere, from restaurants and nightclubs to most work places. But people still smoke around the globe, which is one reason Reynolds American Inc. (RAI) announced that it has reached an agreement with British American Tobacco Plc. (BAT).

Under the deal, BAT will acquire the 57.8% of RAI common stock that BAT doesn’t currently own for $29.44 per share in cash, according to a press release by Reynolds. That translates to a roughly $49bn takeover, and now BAT, which makes Dunhill, Rothmans and Lucky Strike, gets the Reynolds brands Newport, Camel and Pall Mall, among others.

Anti-smoking campaigns, like the very effective Truth campaign – which includes the non-profit’s latest #Squadless campaign to stop teen smoking – are not as prevalent in developing countries around the globe, and so the merger will mean that the company is looking to market its products overseas. Reynolds currently mostly markets and sells to the American market.

Following the transaction, the combined companies become a “stronger, truly global tobacco and Next Generation Products company, delivering sustained long-term profit growth and returns,” said the release.

“It will maintain a presence in both profitable developed and high-growth developing markets while bringing together a compelling and complementary global portfolio of strong brands. The companies’ combined next-generation product development and R&D capabilities will create an innovative pipeline of vapor and tobacco-heating products, delivering both an array of new product options for adult tobacco consumers, as well as diversified sources of profit growth opportunities for investors,” it continued.

Electronic cigarettes and “vaping” devices are on the rise, and the merger looks to capitalize on those who eschew traditional tobacco products.

“Through this transaction, we form an industry leader that will focus on innovation and brand building,” said Susan M. Cameron, executive chairman of Reynolds American’s board of directors.

“This transaction will not only create a truly global business with a world-class portfolio of tobacco and next-generation products, but will also benefit from the highly talented and experienced employees in both organizations. We believe that this will drive long-term sustainable profit growth for the benefit of all shareholders,” said Nicandro Durante, British American Tobacco’s chief executive officer.

British American Tobacco has a strong track record of successfully integrating acquisitions and remains committed to Reynolds American’s US workforce and manufacturing facilities.