Reynolds American Inc. To Merge with British American Tobacco

January 17, 2017
CSD Staff
Combination will create a global tobacco company with multiple iconic tobacco brands, and a world-class pipeline of next-generation vapor and tobacco-heating products, says RAI’s executive chairman of the board of directors.
Reynolds American Inc. (RAI) today announced that it has reached an agreement with British American Tobacco p.l.c. (BATS.L) under which BAT will acquire the 57.8% of RAI common stock that BAT does not currently own for $29.44 per share in cash and a number of BAT American Depositary Shares representing 0.5260 of a BAT ordinary share, currently worth $30.20 per share based on the BAT closing share price as of Jan. 16, 2017, and the corresponding Dollar-Sterling exchange rate.
The per-share price represents a 26.4% premium to RAI’s closing price as of Oct. 20, 2016, the day prior to BAT’s public proposal to acquire the outstanding shares that BAT does not currently own.
Under the terms of the agreement, RAI shareholders will receive for each share of RAI common stock they own, $29.44 in cash and a number of BAT American Depositary Shares representing 0.5260 of a BAT ordinary share. The BAT American Depositary Shares will be listed on the New York Stock Exchange. RAI shareholders will own approximately 19% of the combined company.
The transaction has been approved by the independent directors of RAI who formed a transaction committee to negotiate with BAT, given BAT’s existing ownership stake and representation on RAI’s board of directors, and by the boards of directors of both companies.
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. 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 including Newport, Kent and Pall Mall. 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.
“Through this transaction, we form an industry leader that will focus on innovation and brand building,” said Susan Cameron, executive chairman of Reynolds American’s board of directors. “This combination will create a truly global tobacco company with multiple iconic tobacco brands, and a world-class pipeline of next-generation vapor and tobacco-heating products.”
“The transaction delivers significant value to RAI shareholders, and the independent directors on the transaction committee have unanimously voted in favor of the transaction,” said Lionel Nowell, III, lead independent director of Reynolds American’s board of directors. “This is an agreement that offers a compelling premium to shareholders, as well as continued ownership in a company that is well-positioned for long-term success.”
“We look forward to bringing together the two companies’ highly complementary cultures and shared commitment to innovation and transformation in our industry,” said Debra Crew, Reynolds American’s president and CEO. “British American Tobacco is the best partner for Reynolds American’s next phase of growth, and together the two companies will create the leading portfolio of tobacco and next-generation products for adult tobacco consumers.”