British American Tobacco has agreed to a $49.4 billion (about Sh5.13 trillion) takeover of US rival Reynolds American Inc, creating the world’s biggest listed tobacco company after it increased an earlier offer by more than $2 billion (about Sh 207.86 billion).

BAT, which already owned 42 per cent of Reynolds, will pay $29.44 (about Sh3,058.8) in cash and 0.5260 BAT shares for each Reynolds share, it said, a 26 per cent premium over the price of the stock on October 20, the day before BAT’s first offer was made public. Reynolds, the maker of Camel and Newport cigarettes, rejected the approach a month later, according to sources, although the two sides remained in talks.

The deal, which values the whole of Reynolds at around $86 billion (Sh8.9 trillion), will mark the return of BAT to the lucrative and highly regulated US market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets. BAT chief executive Nicandro Durante said bringing the two companies together will create a market leader with brands including Newport, Lucky Strike, Camel and Pall Mall.

“It will create a stronger, global tobacco and NGP (next generation products) business with direct access for our products across the most attractive markets in the world,” he said on Tuesday.

Analysts have said the takeover could spark further deals as Philip Morris International and Japan Tobacco jostle for market share in the industry.

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