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BAT Bids $47 Billion for Full Ownership of Reynolds American

  • Deal would create largest publicly traded tobacco company
  • Reynolds, the maker of Camel cigarettes, sees shares surge

British American Tobacco Plc offered to pay $47 billion for full control of Reynolds American Inc., proposing a blockbuster trans-Atlantic deal that would create the world’s largest publicly traded tobacco company and put brands such as Lucky Strike and Camel under the same roof.

The unsolicited cash-and-stock offer of $56.50 a share, announced Friday, would allow London-based BAT to acquire the 58 percent of Reynolds that it doesn’t already own. But the U.K. company only plans to pursue the transaction with the support of Reynolds. The two sides haven’t yet held negotiations, BAT said, and the Reynolds board is just now reviewing the offer.

The move renews the merger frenzy of a fast-consolidating tobacco industry, where companies are fighting for market share and scrambling to develop alternatives to traditional cigarettes. For BAT, the idea is to get a bigger foothold in the U.S. and capitalize on Reynolds’s leadership in electronic cigarettes. The acquisition also would be the biggest transaction by a U.K. company since the nation voted in a June 23 referendum to leave the European Union.

BAT and Reynolds' close links

    • British American Tobacco has held a 42 percent stake in Reynolds American since 2004.
    • BAT has appointed five representatives to Reynolds' board, although none of them will be involved in the decision-making process of the deal.
    • Two BAT executives and three former executives serve on the board of Reynolds.
    • Susan Cameron, President and Chief Executive Office of Reynolds, previously held the same position at BAT subsidiary Brown & Williamson.
    • Reynolds' largest brands include Camel and Newport, while BAT sells Dunhill and Lucky Strike.

“The timing is a surprise, but the strategic rationale makes perfect sense, pivoting BAT further towards the high-value U.S. market,” said Guy Ellison, head of U.K. equities at Investec Wealth & Investment. “The ball is now in...