London-based, British American Tobacco is reportedly set to merge with its US partner Reynolds American, (NYSE:RAI) in a deal close at $47 billion.
British American Tobacco PLC announced in a statement that it has made a $47 billion takeover bid for the almost 58% of American company Reynolds American Inc. that it doesn’t already own, a move that would strengthen the two cigarette giants’ old partnership and create what it said would be the world’s largest listed tobacco company by net sales.
This deal if completed would combine together some of the tobacco industry’s most prolific brands, such as Rothmans, Dunhill and Camel cigarettes.
Since last 12 years, British American Tobacco has been one of the key shareholder in Reynolds and the company said the merger was “the logical progression in our relationship”.
According to the reports, the London based giant is set to offer $20 billion in cash and $27 billion in shares for the US business. The company is ironically aiming to make $400m worth of cost-savings through the deal, which comprises assets such as Reynolds’ production facility in Tobaccoville, North Carolina.
Reports further said that deal is far to be concluded as BAT has not until now held talks with Reynolds and said the deal would have to be sanctioned by all the US Company’s independent directors.
British American Tobacco has held a major stake in the company since 2004 after merging its US operations, known as Brown & Williamson, with RJ Reynolds. A new parent company was established at the time, of which BAT owns a 42.2% share.
RJ Reynolds is the second biggest tobacco company in the US after Altria, which owns Philip Morris USA and has been functional since 1875.
BAT CEO Nicandro Durante said in a statement that the merger would create the U.S. market leader and the world’s largest listed tobacco company by net turnover and operating profit.
“We are proud of the Group’s track record of consistent delivery for shareholders and bringing these two great companies together would further strengthen that delivery in the future,” he said.