BAT signs £$49bn merger deal to create tobacco giant

British American Tobacco (BAT) is to take control of US rival Reynolds in a $49.4bn (£40.69bn) deal that creates the planet's largest listed tobacco firm and unites some of the industry's best-known brands, the BBC reports.

The agreement comprises $25bn (£20.59bn) of BAT shares and $24.4bn (£20.1bn) in cash, valuing Reynolds at more than $85bn (£70bn).

It "creates a stronger, truly global tobacco [business]", said BAT, which previously had a 42.25 per cent stake in the US company.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

The merger will also strengthen BAT's foothold in the US and give the combined business a significant presence in high-growth markets including South America and the Middle East.

Chief executive Nicandro Durante said: "We believe this [deal] will drive continued, sustainable profit growth and returns for shareholders long into the future."

BAT, the maker of more than 200 brands and a big player in the e-cigarettes market, estimates it can make $400m (£329.5m) of cost-savings through the deal, which now sees the likes of Lucky Strike, Rothmans and Camel under one roof.

Negotiations lasted several months. BAT said last year that a merger with Reynolds would be "the logical progression in our relationship", but its initial approaches were rebuffed, with a $47bn offer rejected last November.

City AM reports that BAT's shares rose 1.2 per cent at the open.