Business Irish

Saturday 21 October 2017

Ex-Irish Distillers boss in line to lead world's biggest tobacco company

Richard Burrows is a former governor of Bank of Ireland
Richard Burrows is a former governor of Bank of Ireland
John Mulligan

John Mulligan

Former Irish Distillers boss Richard Burrows could end up being board leader of the world's biggest tobacco company - if US firm Reynolds accepts a $47bn (€43bn) takeover offer from British American Tobacco (BAT).

Mr Burrows is chairman of BAT, which has just offered to buy the 58pc stake in Camel maker Reynolds it doesn't already own. If the deal goes ahead, it will create a tobacco firm with a market capitalisation of over €170bn.

It's not known yet who would be chairman or chief executive of the combined group but there is already some executive overlap between the two.

A keen yachtsman, Wesley College-educated Mr Burrows led Irish Distillers from 1978 until 2000.

The accountant was in charge when it was bought by French group Pernod Ricard in 1988 following a hostile takeover battle waged by Guinness owner Grand Metropolitan, which later became Diageo.

In 2000, he was appointed joint managing director at Pernod Ricard.

He also became the governor of Bank of Ireland in 2005, a role he relinquished in 2009. He had been on the bank's board since 2000 and was named deputy governor in 2002. He was named chairman of BAT in 2009.

He is also a non-executive director of Carlsberg, and pest control giant Rentokil Initial. Earlier this month, he was named chairman of AIM-listed investment firm Craven House Capital.

Mr Burrows is paid a £645,000 annual salary for his role at BAT. He also has the use of a company driver and is provided with home and personal security services by the group. Those additional benefits valued his total remuneration package at £727,000 (€813,000) last year.

Mr Burrows also owns 15,000 shares in BAT, currently valued at £745,000.

BAT owns brands including Dunhill, Rothmans, Lucky Strike, and Benson & Hedges. Apart from Camel, Reynolds owns Newport, the leading menthol cigarette, and Kent.

BAT chief executive Nicandro Durante said the deal would create a US market leader and the world's largest listed tobacco company by net turnover and operating profit.

It would have about 12.5pc of the global market share, behind Marlboro maker Philip Morris, with 14.7pc, and the 44pc held by China National Tobacco.

"The strategic rationale makes perfect sense," said Guy Ellison, an analyst at Investec Wealth & Investment.

The deal would pivot BAT further towards the high value US market, consolidating some strong brands and Reynolds' position in "next generation tobacco" products such as e-cigarettes, he added.

The $47bn deal would be satisfied via a payment of $20bn in cash to Reynolds' shareholders, and $27bn in BAT shares.

Reynolds bought Newport-maker Lorillard in 2015, making it a stronger competitor to Marlboro-maker Altria. Together, Reynolds and Altria dominate the US market.

In order to maintain its 42pc stake in Reynolds as a result of that Lorillard deal, BAT invested $4.7bn in Reynolds.

BAT has owned its 42pc stake in Reynolds since 2004.

Because BAT already has such a big holding in the US group, rules set by the US Securities and Exchange Commission require disclosure of such an approach as soon as it has been made.

Since Britain's shock vote to leave the European Union in June, shares in BAT soared to all-time highs as investors bet the falling pound would boost the profits of companies that make most of their revenue outside the United Kingdom. (Additional reporting Reuters)

Irish Independent

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