British American Tobacco (BATS.L) has offered to buy U.S. tobacco company Reynolds American Inc (RAI.N) in a $47 billion deal that would bring together Newport, Kent and Pall Mall cigarettes in the world’s biggest listed tobacco company.
The British group, which has a 42 percent stake in Reynolds, said its offer valued the company’s shares at $56.50, of which $24.13 would be in cash and $32.37 would be in BAT shares, representing a premium of 20 percent over the closing price of Reynolds stock on Thursday.
The total price for the remaining 57.8 percent of Reynolds would be $47 billion, of which approximately $20 billion would be in cash and $27 billion in BAT shares.
BAT Chief Executive Nicandro Durante said the deal would create the U.S. market leader and the world’s largest listed tobacco company by net turnover and operating profit.
A spokesman for Reynolds was not immediately available outside U.S. business hours.
Shares in BAT have traded at all-time highs since Britain voted to leave the EU in June, a shock decision that sent the pound tumbling and boosted the stock prices of companies that make most of their revenue outside the United Kingdom.
BAT shares, which reached a high of 5,135 pence in July, were trading up 2.3 percent at 4,913 pence at 0722 GMT. If successful, the takeover would be one the biggest this year by a British company.
The tie-up is also one of the only mega deals left in a global tobacco industry which is already dominated by six companies, and it would create the only player with a major presence in both U.S. and international markets.
Reynolds, which bought Newport-maker Lorillard in 2014, and Altria Group dominate the U.S. market. It has so far not responded to the offer.
Smoking rates in the United States and other western markets are declining, due to increasing health consciousness and greater regulation and taxes. All big tobacco firms are investing in e-cigarettes and other vapor-based products, to diversify.
BAT has in recent years focused on international markets such as Ukraine, Bangladesh, Russia, Vietnam and Turkey where smokers are increasingly choosing premium cigarettes like its Dunhill, Lucky Strike, Pall Mall and Rothmans brands.
Its brands are sold in more than 200 markets, with market-leading positions in at least 55.
Reynolds’ stock fell to a 12-month low on Wednesday after its third-quarter earnings came in 6 percent short of market forecast, Jefferies analysts said, on the back of a disappointing 1.5 percent fall in domestic cigarette volumes.
BAT also said on Friday it had performed well in the first nine months of the year, growing both revenue at constant rates of exchange and cigarette volumes, driven by its focus
Year-to-date revenue grew 8.1 percent at constant rates of exchange, it said, as its biggest brands sold 9.8 percent more cigarettes.
BAT was advised by Centerview, Deutsche Bank and UBS on the deal.