American exceptionalism

21 October 2016 By Dominic Elliott

The German lender is advising BAT on its $47 bln bid for the bit of Reynolds American it doesn’t own. With around $18 bln in debt needed, Deutsche Bank could play a big part. Mergers like this are one reason transatlantic investment banking is a tough habit to kick.

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Deutsche Bank is one of the banks advising British American Tobacco on its bid to buy the 58 percent it does not already own of U.S. tobacco company Reynolds American.

BAT said on Oct. 20 that its bid valued Reynolds at $56.50 per share, of which $24.13 would be in cash and $32.37 would be in BAT shares. That values the non-BAT stake at $47 billion.

The cash component of the merger would be financed by a combination of existing cash resources, new bank credit lines and the issuance of new bonds, BAT said.

BAT had 1.9 billion pounds ($2.3 billion) of net cash as of June 30. If that were used in full, it would still need to raise $17.6 billion in debt to reach its offer price.

BAT is also being advised by Centerview and UBS.

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