British American Tobacco offers Reynolds American $47 billion buyout deal

The world’s largest publicly traded tobacco company may be in the making if after British American Tobacco (BAT) offered to buy US tobacco giant company Reynolds American at $47 billion. The October 21 offer comes as US companies face a decline in the use of tobacco products. London-based BAT owns brands like Pall Mall and Lucky Strike and holds 42% shares stake in Reynold. The buyout offer would give them the other 58%. The proposed buyout has valued each Reynolds share at $56.50 each which is a premium of 20% above the price at which the stock closed on October 20.
A press release from BAT said that the merger would create a stronger tobacco company that was truly global. BAT also said that the new company would take the position of leader in the US tobacco market. The buyout would also have a significant presence in emerging markets with high growth rates such as those in Africa, Asia, South America and the Middle East. This is in contrast to the US market where e-cigarettes had become more popular.
Still relation to the market, another goal of the merger is to recapture the declining demand for tobacco products by promoting e-cigarettes. Today, only a smaller number of adults smoke conventional cigarettes compared to any point of time in the past half-century. This can be attributed to laws that have been enacted about advertising of tobacco products and health awareness campaigns that have the public much more knowledgeable about the effects of smoking.

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