Prime News Ghana

Business or Health? British Tobacco set to take over US’s Reynolds

By Sam Edem
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While global health statistics continue to provide a frightening outlook on the devastating impact of tobacco use, especially among young people, Big Tobacco still remains very much a thriving industry more so, it continually seeks new means to expand its market.

The latest being a $49.4bn (£40bn) takeover deal between British American Tobacco and its US rival Reynolds and in effect, creating the world's largest listed tobacco company.

Negotiations over the takeover bid between BAT and Reynolds has been on for months now and basically involved the British Tobacco giant buying 57.8% shares at the US counterpart in which it already has held considerable stake since 2004.

The merger is expected to bring to end competition between some of global tobacco industry's leading brands such as Rothmans, Camel, Lucky Strike, and Dunhill cigarettes.

Speaking on the deal, the English tobacco leader said a merger "creates a stronger, truly global tobacco" business. It further asserted that, given her over a decade involvement with Reynolds business, the deal is only "the logical progression in our relationship".

BAT, late last year made initial moves for a merger deal but had, in November 2016, the $47bn offer rejected by Reynolds.  The UK company predicts a $400m catch via cost-savings if the deal sails through.

The $49bn offer includes BAT’s existing $25bn worth shares at Reynolds and $24.4bn in cash, representing approximately 58% stake in the US tobacco firm currently valued at $85bn.

In an official statement from the UK firm, chief executive, Nicandro Durante said "We have been shareholders in Reynolds since 2004 and we have benefited from the success of the present management team's strategy, including its acquisition of Lorillard, which we supported with our own investment in 2015. “

He further expressed the company’s optimism by asserting that its "combination with Reynolds will benefit from utilizing the best talent from both organizations. It will create a stronger, global tobacco and NGP [new-generation products] business with direct access for our products across the most attractive markets in the world."