British American Tobacco is hoping to muscle its way further into the US market by buying the 58% of Reynolds American that it doesn't already own. BAT has offered cash and stock valued at $56.50 a share, a 20% premium to Reynolds' share price.
The deal, which would create the world's largest publicly listed tobacco company, is "the latest blockbuster consolidation attempt in big tobacco", say Arash Massoudi and James Fontanella-Khan in the Financial Times. Last year Imperial Tobacco acquired $7bn worth of US brands from Reynolds and Lorillard. This boosted its profits by 15%, offsetting falling sales elsewhere.
Perhaps surprisingly, the US is once more an attractive market for tobacco companies, despite fewer people smoking profits there rose by 10% last year. The country is "expected to be a key driver of sales growth, with low pack prices, a dominant e-cigarette market and waning fears of litigation costs", says the FT. Hence shareholders seem to approve. BAT's shares rose to an all-time high on Friday, though they have since slipped back.
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One person who almost certainly will be happy is Susan Cameron, Reynolds' long-serving chief executive. According to Ben Martin in The Daily Telegraph, she is "in line for a share windfall of at least £12m" from her 269,001 shares in the firm.
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