Fitch Ratings has placed British American Tobacco’s long-term issuer default rating and senior unsecured ratings of ‘A-‘ on rating watch negative following the proposed merger with US-based Reynolds American Inc (Reynolds BBB/rating watch positive).
Fitch says the rating action reflects the likely material balance sheet re-leveraging of BAT, should its plans to launch a formal offer for Reynolds and proceed to a merger be successful at the terms published on Friday.
Fitch says the transaction would enhance BAT’s geographic diversification by giving it full exposure to the very large and profitable US tobacco market. It would also create scope for cost and product development synergies from the integration of two companies that share the same brands but are run separately.
Reynolds’ board has yet to respond to the proposal. Fitch says the ratings are likely to be downgraded by up to two notches upon a successful completion of the merger, or affirmed if the transaction fails to complete.
At 8:05am: (LON:BATS) British American Tobacco PLC share price was -13.5p at 4665p
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