RAI Forms Committee to Evaluate BAT Takeover Proposal

WINSTON-SALEM, N.C. — Reynolds American Inc. (RAI) has formed a transaction committee made up of independent directors to evaluate British American Tobacco plc's (BAT) offer to acquire RAI.

On Oct. 20, BAT issued a non-binding proposal to acquire the approximately 58 percent of RAI common stock it does not own, as CSNews Online previously reported. BAT already owns 42.2 percent of the tobacco company.

The $47-billion offer values RAI at $56.50 per share, of which $24.13 would be in cash and $32.37 would be in BAT shares. This represents a premium of 20 percent over the closing price of RAI common stock as of Oct. 20.

A merger of the two organizations would create "a stronger, truly global tobacco and Next Generation Products (NGP) company," according to United Kingdom-based BAT. It would reportedly be the world's largest listed tobacco company by net turnover and operating profit. 

Weil, Gotshal & Manges LLP and Moore & Van Allen PLLC will serve as legal counsel for the newly formed transaction committee. Goldman, Sachs & Co. will act as financial advisor to assist the committee in its evaluation of the proposal. RAI has also retained Jones Day as legal counsel, and J.P. Morgan Securities LLC and Lazard as financial advisors.

Due to the proposal evaluation, RAI has canceled its Investor Day previously scheduled for Nov. 14.

RAI is the parent company of R.J. Reynolds Tobacco Co., Santa Fe Natural Tobacco Co. Inc., American Snuff Co. LLC, Niconovum USA Inc., Niconovum AB and R.J. Reynolds Vapor Co.