British American Tobacco (BATS.L) has agreed a $49.4 billion takeover of US rival Reynolds American Inc (RAI.N), creating the world's biggest listed tobacco company after it increased an earlier offer by more than $2 billion.
BAT was particularly interested in Reynolds because the acquisition will let them re-enter the regulated USA market after an absence of 12 years.
British American Tobacco's $49.4 billion takeover of Reynolds American is a benefit for both companies despite criticism that Reynolds could have gotten a better price, Reynolds American Executive Chairman Susan Cameron told CNBC on Tuesday.
The deal, the companies announced, will give British American full ownership of Reynolds, instead of just the 42.2% stake in the company it already owns.
British American Tobacco Plc has agreed to fully take over Reynolds American Inc. on terms that are improved from an initial bid made previous year.
Established in 1902, BAT on Tuesday became the largest listed tobacco firm in the world. At that time, BAT offered $47 billion.
More detailed information also led BAT to slightly increase its cost-savings forecast to at least $400 million in three years, up from the $400 million it reported as part of its initial announcement in October, the person said.
"It will create a stronger, global tobacco and NGP business with direct access for our products across the most attractive markets in the world". The Company's brands include Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans. The company provides variable, universal, term, and whole life products; individual disability income products; personal lines property and casualty insurance, including private passenger automobile, homeowners, and personal excess liability insurance; and variable and fixed annuities for asset accumulation and distribution needs, as well as mutual funds and other securities products.
Reynolds alone has a 34% of the cigarette share in the US, while the combined company has a large presence around the world, including the Middle East, South America, Africa and Asia.
Shareholders and regulators still have to approve the merger, but, if it goes through, BAT and Reynolds expect it to be a done deal by the third quarter of this year, according to CNN Money.
The deal has been approved by a transaction committee made up of independent Reynolds' directors, it says.
Reynolds is the second-largest tobacco company in the U.S. and recently completed a $25 billion takeover of United States rival Lorillard. The two companies already collaborate on technology, and their flagship e-cig products - BAT's Vype and Reynolds's Vuse - do not compete in key markets.
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