 BAT denies this is a retreat from the US |
RJ Reynolds has agreed to pay $3.2bn for the US operations of British American Tobacco, in a deal that goes some way to rivalling market leader Philip Morris. The merger will create a new holding company, Reynolds American, which will combine RJ Reynolds Tobacco and BAT's Brown & Williamson.
BAT will remain a 42% minority shareholder in Reynolds American, and is not paying for its participation in the venture.
Reynolds American will have a combined turnover of $10bn, compared with $19bn in US revenue at Philip Morris, which has a near-50% share of the US market.
'No retreat'
BAT said it envisaged cost savings of $500m from the deal, while RJ Reynolds mentioned a figure of $800m.
 | TOP BRANDS BAT: Kool, Lucky Strike and Pall Mall in US; Benson & Hedges, Rothmans and Dunhill elsewhere. RJ Reynolds: Winston, Camel |
BAT denied that the deal represented any sort of retreat from the US market, despite its lack of control over the merged firms. The British firm is barred from increasing its shareholding in the venture for the next 10 years, but chairman Martin Broughton said BAT had "absolutely no intention" of selling out to RJ Reynolds.
"I don�t see how you can be a global tobacco company without a big interest in the US," he said.
"It really strengthens our position and we are comfortable with a significant shareholding."
The deal completes a stunning day for US mergers, with deals worth almost $80bn announced before the markets closed.
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