25 January 2017

Tobacco giant emerges as BAT and Reynolds tie the knot

British American Tobacco has taken control of US rival Reynolds American in a $49.4bn deal.

By Kathryn Higgins

Last week, the British tobacco monolith announced that, after months of negotiation, it has agreed to acquire its rival Reynolds American for $49.4bn. The landmark deal will see BAT pick up the 57.8% stake in Reynolds that it doesn’t already control, and in turn create a ‘stronger, truly global’ tobacco business. BAT has been absent from the US tobacco market for 12 years after its former US unit, Brown & Williamson, was absorbed into Reynolds American predecessor RJ Reynolds in a $3bn deal in 2004. Beyond returning BAT to the lucrative (but heavily regulated) US market, the megamerger with Reynolds will make BAT the largest publicly traded tobacco company in the world.

Firms advise

This bumper deal has called in a bumper cast of firms to work through the legal intricacies. Wall Street giant Cravath, Swaine & Moore has been advising BAT alongside Herbert Smith Freehills on its takeover plans for Reynolds since last year, when the British company first extended a $47bn offer that was later rejected. Meanwhile, Reynolds has been advised by a team from Jones Day, while a transactional committee of Reynolds board members is being advised by a transatlantic team from Weil, Gotshal & Manges. The committee’s financial advisor, Goldman Sachs, is being advised by a team from Skadden, Arps, Slate, Meagher & Flom.

Sources: The American Lawyer; BBC

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