The London-listed cigarettes maker already owns 42.2% of Reynolds, and is pitching its offer for the rest of the shares at US$56.50 a share, versus last night’s closing price for shares of Reynolds of US$47.17.
BATS’ offer will be a mixture of cash and shares, with the cash element worth US$24.13.
The UK company said the premium it is offering over the current share price of Reynolds is justified by modest cost synergies, and that the acquisition, if it goes through, would enhance earnings in the first full year of ownership.
“The transaction would create a broader, larger business, delivering more diversified sources of profit growth,” BATS claimed.
The proposed merger is subject to the independent directors of Reynolds, which is to say those not appointed by BATS in its role as major shareholder, giving the thumbs-up to the offer and shareholders subsequently doing likewise.
“We have been a shareholder in Reynolds since its creation in 2004 and have benefited from its growth in the US market. The acquisition of Lorillard in 2015 has further strengthened Reynolds’s business,” noted Nicandro Durante, chief executive of BATS.
“The proposed merger of our two great companies is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and Next Generation Products company. BAT is proud of its track record of consistent delivery for shareholders and this transaction would further strengthen that delivery in the future,” Durante added.
Story by ProactiveInvestors