British American Tobacco has reached agreement to buy full control of Reynolds American Inc with a sweetened $49.4bn (€46.1bn) offer, bringing a successful end to almost three months of bartering with the maker of Camel cigarettes.
BAT increased the cash element of a cash-and-share bid for the 58pc of Reynolds that it doesn't already own. The new offer values each Reynolds share at $59.64, the London-based maker of Dunhill and Lucky Strike said Tuesday, about 5.6pc more than the $56.50 it proposed on October 21.
Hammering out the terms of an improved deal has been a slow process for the cigarette makers, complicated by uncertainty created by Donald Trump's election. With agreement in place, the companies can move forward with a combination that marks the latest stage in a wave of consolidation for the industry, which is struggling with shrinking demand for traditional cigarettes and an uncertain pathway to new, potentially less harmful technologies.
"The market will be relieved that they have got the deal over the line," said Richard Marwood, a fund manager at Royal London Asset Management whose assets include BAT shares. "People were starting to worry that the negotiations might break down."
The UK company said it's offering $29.44 in cash and 0.526 of a BAT share for each Reynolds share, pushing the cash element up from $24.13. That values Reynolds at 16.9 times earnings before interest, tax, depreciation and amortization, BAT said. (Bloomberg)