The combined company would create a massive tobacco powerhouse with a market cap of over $170 billion.
British American already owns a 42.2% stake in Reynolds, so the offer is to acquire the remaining 57.8% in the company. The deal is subject to approval by both companies’ boards and shareholders, not to mention U.S. regulators, who very well may take an antitrust look at the proposal.
BTI noted that “US securities laws require [the company] to announce its merger proposal promptly after it was made to the Board of Reynolds. As a result, BAT has been unable to have prior negotiations with Reynolds regarding the proposal.”
The $56.50 per share offer represents a nearly 20% premium over RAI’s Thursday closing price of $47.17. BTI noted that deal is comprised of $24.13 per share in cash, with the remaining $32.37 in British American shares. BTI stated that “there is a strong financial rationale for the transaction that supports long-term delivery for all stakeholders.”
Reynolds American shares jumped $10.87 (+23.04%) to $58.04 in premarket trading Friday on the news.
Meanwhile, BTI investors were also bullish on the news, sending its shares up $3.09 (+2.62%) to $21.22 in premarket trading.