British American Tobacco Actually Buying Reynolds For Real This Time, For $49 Billion

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It looks like the end of a months-long, will they-won’t they saga is finally drawing to a close: North-Carolina based R.J. Reynolds American has finally agreed to let British American Tobacco buy out the remaining part of the company it doesn’t already own for $49 billion.

The deal, the companies announced, will give British American full ownership of Reynolds, instead of just the 42.2% stake in the company it already owns.

British American first tried to buy out the rest of Reynolds in October of last year, offering $47 billion for the rest of the company. However, less than a month later Reynolds reportedly rejected that offer.

At the time, reports suggested that the two companies remained in negotiation, and that BAT would likely increase its offer slightly and try again. And while $2 billion is hardly pocket change to the likes of most of us, the jump from $47 billion to $49 billion is only about 4%, give or take. In other words, small potatoes for giant international corporations.

In a press release, BAT CEO Nicandro Durante said the merger “will create a stronger, global tobacco and N.G.P. business with direct access for our products across the most attractive markets in the world.”

He added, “We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future,” which is exactly the sort of thing that CEOs say.

That “NGP business” Durante referenced in his statement is likely the key to the whole deal. While cigarettes remain a lucrative item in some areas, increased legislation, taxation, and consumer education have changed their perception in developed nations like the U.S. and UK. But electronic cigarettes and the entire world of vaping and liquid nicotine are new and growing markets for existing Big Tobacco companies — including Reynolds, which sells the Vuse vaping system.

E-cigarettes are now subject to some FDA regulation, but still have experienced skyrocketing growth — especially among kids.

The tobacco industry, meanwhile, has been going through all kinds of contortions in recent years. Reynolds bought up competitor Lorillard in 2015, after agreeing to divest the Salem, Kool, and Winston brands. That merger made Reynolds a strong competitor to the top tobacco company in the U.S., Altria — probably best known to consumers as Philip Morris, the maker of Marlboros.

Now, it will be BAT competing with Altria both here and abroad — at least, provided the deal clears both companies’ boards and gains regulator approval.