British American Tobacco (BATS.L) has agreed a $49.4 billion takeover deal of U.S. rival Reynolds American Inc (RAI.N), creating the world’s biggest listed tobacco company after it increased an earlier offer by more than $2 billion.
BAT, which already owned 42 percent of Reynolds, will pay $29.44 in cash and 0.5260 BAT shares for each Reynolds share, it said, a 26 percent premium over the price of the stock on Oct. 20, the day before BAT’s first offer was made public.
Reynolds, the maker of Camel and Newport cigarettes, rejected an initial approach in November, although the two sides remained in talks.
The deal, which values the whole of Reynolds at around $86 billion, will mark the return of BAT to the lucrative and highly regulated U.S. market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets.
BAT Chief Executive Nicandro Durante said bringing the two companies together would create a market leader with brands including Newport, Lucky Strike, Camel and Pall Mall.
“It will create a stronger, global tobacco and NGP (next generation products) business with direct access for our products across the most attractive markets in the world,” he said on Tuesday.
The U.S. tobacco market was the most profitable outside China, he said in an interview, and BAT “figured there was some room to grow there.”
BAT left the United States in 2004 when it merged its subsidiary Brown & Williamson with R.J. Reynolds to form Reynolds American in 2004. A decade later, the U.S. group agreed to buy Lorillard in a $27.4 billion deal that added the Newport brand to its stable, Reuters reports.