BAT's proposal to merge with Reynolds:
· Values Reynolds at $56.50 per share, of which $24.13 would be in cash and $32.37 would be in BAT shares.1
· Represents a premium of 20% over the closing price of Reynolds common stock on 20 October 2016.
This would create a stronger, truly global tobacco and Next Generation Products (“NGP“) company with:
· A leading position in the US tobacco market, the largest global profit pool (ex-China) with strong growth dynamics.
· A significant presence in high growth emerging markets across South America, Africa, the Middle East and Asia, together with the most attractive developed markets.
· A unique portfolio of strong brands, bringing together ownership of Newport, Kent and Pall Mall.
· Combined Next Generation Products and R&D capabilities to deliver a world class pipeline of vapour and tobacco heating products across all the fastest growing NGP markets globally.
· Creating the world's largest listed tobacco company by net turnover and operating profit.
There is a strong financial rationale for the transaction that supports long-term delivery for all stakeholders:
· This is a premium offer, supported by modest cost synergies, with a significant share consideration enabling participation in the long-term benefits.
· It is earnings accretive in the first full year.
· It is expected to be accretive to dividends per share.
· The transaction would create a broader, larger business, delivering more diversified sources of profit growth.
· The combined company would maintain a strong financial profile, with a target of maintaining a solid investment grade credit rating and enhanced cash generation.