Reynolds on fire after United Kingdom tobacco rival pounces

British American Tobacco Plc proposed buying the shares of Reynolds American Inc. that it doesn't already own, a deal that would cost the maker of Lucky Strike cigarettes about $47 billion.

BAT, which made a £5 billion profit past year from brands like Dunhill and Lucky Strike, has owned a 42.2% stake in Reynolds since 2004 when Brown & Williamson merged with RJ Reynolds.

British American Tobacco announced plans Friday to buy the stake that it doesn't already own of tobacco firm Reynolds American Inc. for $47 billion.

Last year, Reynolds completed its own $25 billion acquisition of Lorillard after yearlong scrutiny by regulators. Finally, Vetr raised shares of Reynolds American from a buy rating to a strong-buy rating and set a $56.12 price objective on the stock in a research report on Thursday, September 8th.

Of course, BAT and Reynolds aren't exactly strangers, the two companies have been tied together since 2004, when Reynolds bought BAT subsidiary Brown and Williamson Tobacco Corp.

And the combined group would have a "world class pipeline" of so-called next generation products, like e-cigarettes, in a fast-growing part of the market, it added. Investors would receive $24.13 in cash and 0.5502 of a BAT share for each Reynolds share they own. The menthol brand, which accounted for nearly all of Lorillard's $7 billion in sales in 2014, has been increasing its market share as smokers under 30 years old increasingly opt for minty- flavored cigarettes over traditional smokes.

BAT said it's been unable to have prior negotiations with the board of Reynolds as US securities laws require it to announce the plan promptly. Therefore, we believe Reynolds American may seek to negotiate a higher price...

BAT has been a shareholder in Reynolds since selling its litigation-hit U.S. business to it in 2004.

BAT shares, which reached a high of 51.35 pounds in July, were trading up 2.3 percent at 49.34 pounds at 0848 GMT. The company has struggled with declining tobacco volumes as well as slowing sales of e-cigarettes. Of this $20bn would be in cash and the remaining $27bn would be in BAT shares. The deal is now subject to support from Reynolds's independent directors and an approval by shareholders of both the companies.

A Reynolds takeover by BAT, which already owns 42 per cent of the US group, has always been seen as part of an inevitable wave of global consolidation in a mature industry.

Debra Crew, 45, at present president and chief operating officer of RJ Reynolds, will replace Susan Cameron at the company's helm.

01/28/2016 - UBS began new coverage on British American Tobacco p.l.c. giving the company a "buy" rating.

The bid announcement accompanied an interim management statement for BATS that revealed revenue grew 8.1% on a constant exchange rates basis in the first nine months of the year, or by 10.2% using actual exchange rates.



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