Ash and ye shall receive

15 November 2016 By John Foley Follow @johnsfoley

The U.S. tobacco maker rejected an offer from its biggest shareholder that values the whole company at $76 bln. A new government at home gives Reynolds a smidgeon of extra negotiating heft. The case for a deal, meanwhile, remains as bewitching as the evil weed itself.

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Reynolds American has rejected a takeover approach from its biggest shareholder, British American Tobacco, according to a source cited by Reuters.

The offer, made up of 0.55 of a BAT share and $24.13 in cash for each Reynolds share, was worth $56.50 per share on Oct. 21, when the offer was announced. At the close of Nov. 14 it was worth $53.54, according to a Breakingviews calculation.

UK-based BAT owns 42 percent of Reynolds, which it took as a swap for its U.S. business in 2004.

BAT said on Oct. 21 that it anticipated “modest” cost savings of $400 million a year from the combination.

Reynolds shares closed at $53.05 on Nov. 14, giving the company a market capitalisation of $76 billion.

BAT shares were trading down 0.5 percent at 43.01 pounds at 0900 GMT, giving the company a market capitalisation of 81 billion pounds ($101 billion).

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