LONDON–British American Tobacco (BAT) is offering to buy Reynolds American Inc in a US$47 billion deal that would create the world's largest publicly-traded tobacco company and attempt to make up for a decline in smoking in the US and Europe.
Local manufacturer West Indian Tobacco Company Limited (WITCO) is a member of the British American Tobacco Group.
With tobacco firms under pressure from health groups in developed economies and increasingly popular electronic cigarettes, a merger of this size would help them consolidate costs and resist competition from Asia, analysts say.
BAT, which is based in London and owns brands like Dunhill, Rothmans and Lucky Strike, has a greater presence in faster-growing regions like Latin America, Africa, the Middle East and Asia.
It is much larger as a company than Reynolds, which is predominantly focused on the US, where its Newport, Camel and Pall Mall brands are among the top four in the country.
London-based BAT offered Friday to buy the 57.8 per cent of Reynolds it doesn't already own for the equivalent of US$56.50 per share, 20 per cent more than Thursday's closing price. Investors would receive US$24.13 in cash and 0.5502 of a BAT share for each Reynolds share they own. The deal values Reynolds, based in Winston Salem, North Carolina, at US$93 billion.
Shares in Reynolds jumped about 20 per cent to US$56.50 in premarket trading in New York, while BAT was up 4.1 per cent to �50 in London.
The merger "is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and next generation products company," BAT Chief Executive Nicandro Durante said, referring to the firms' expansion into electronic cigarettes.
Reynolds said in a statement that it will evaluate the offer.
Tobacco companies are particularly keen to expand in developing countries to make up for weaker sales in Europe and the US, where public awareness about the health hazards of smoking has grown.
BAT said it had announced the offer before conducting any negotiations with Reynolds to comply with US law.
The deal would have to be approved by the independent directors of Reynolds and shareholders of both companies.
BAT employs more than 50,000 people globally and has 200 brands in 200 markets.
Reynolds employs 5,700, mostly in the US. (AP)