WINSTON-SALEM, N.C. -- In a move that could force up the price for the second-largest tobacco manufacturer in the United States, Reynolds American Inc. (RAI) rejected a $47 billion buyout offer from British American Tobacco (BAT), apparently seeking a higher price, according to the Bloomberg news agency.
Bloomberg said BAT is willing to increase the price slightly, citing sources close to the matter. London-based BAT, which already owns 42% of Reynolds, disclosed its proposal to acquire the rest of the company on Oct. 21.
Spokespersons for BAT and RAI declined to comment, the news agency said.
The transaction would let BAT overtake Philip Morris International, New York, as the world’s largest publicly traded tobacco company, Bloomberg reported. It also would give BAT a strong foothold in the United States and access to Reynolds’ leading e-cigarette rank. The report noted that China National Tobacco Corp., run by China’s State Tobacco Monopoly Administration, is the biggest tobacco company overall.
BAT’s unsolicited cash-and-stock offer of $56.50 a share represented about a 20% premium to Reynolds’s closing price the previous day back in October, but BAT only plans to pursue the deal with Reynolds’ support. Ten days after the offer was announced, Reynolds created a transaction committee to consider the proposal.
“We are not surprised to see that RAI has rejected the offer, as we had been calling for a sweetened deal," said analysts with Cowen Group, New York. "We are encouraged that at least according to press reports, that BAT has expressed willingness to increase the offer price.”
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