Johannesburg – British American Tobacco, which has keen on acquisitions even
as it cut jobs in Germany,
is set to buy out Reynolds.
In a
statement issued on Tuesday, the cigarette giant said it would buy the 57.8 percent
of Reynolds American it does not already own for $49.4 billion after agreeing terms with an independent Reynolds committee.
The R670
billion deal is 26 percent premium on Reynolds’ closing price on October 20,
the day before the initial merger announcement was made.
CEO
Nicandro Durante notes BAT has been a shareholder in Reynolds since 2004 and “our
combination with Reynolds will benefit from utilising the best talent from both
organisations”.
Read also: BAT to retrench, seeks deals
“We believe
this will drive continued, sustainable profit growth and returns for shareholders
long into the future.”
The merger
seeks to “create a stronger, truly global tobacco and next generation products company
to deliver sustained long-term profit growth and returns,” BAT says.
In the
first half of the year, adjusted profit from
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operations
was 2.45 billion pounds ($3.2 billion), slightly below analysts’ expectations.
The
company, which is listed in Johannesburg and London, says the deal will give it a “balanced presence in
high growth emerging markets and high profitability developed markets, combined
with direct access to the attractive US market”.
The deal
will consolidate its ownership of Newport, Kent and Pall Mall, which Reynolds –
the second largest cigarette maker in the US – produces.
BAT also
anticipates improved earnings per share and cash generation as a result of the merger.
The deal
has been approved by a transaction committee made up of independent Reynolds’ directors,
it says. However, it remains subject to conditions.