British American Tobacco is the world's second biggest, but most international tobacco company, selling over 300 brands of cigarette in 180 countries. Its products include Lucky Strike, Kent, Dunhill, Pall Mall, Benson & Hedges and State Express 555. Formerly known as BAT Industries the group spun off its insurance division in 1998 into Zurich Financial Services, and then acquired rival Rothmans International. As a result, it now sits just behind Philip Morris International, the world #1. In 2004 the group demerged its US subsidiary Brown & Williamson and combined it with competitor RJ Reynolds to form Reynolds American, in which BAT is the biggest shareholder. BAT offered in 2016 to take full control of Reynolds, and a deal was finally agreed in early 2017 valuing Reynolds at $85bn.
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|Reynolds American||BAT worldwide|
|Imperial Tobacco (Canada)||Souza Cruz (Brazil)|
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Adbrands Weekly Update 18th Jan 2017: US tobacco group Reynolds American accepted an improved offer from British American Tobacco for the shares it doesn't already own. BAT increased its bid for the outstanding 58% of equity from around $47bn to $49.4bn, valuing Reynolds at around $85bn. Despite the steady and continuing decline in the number of American smokers, the US remains the world's most profitable tobacco market. According to BAT CEO Nicandro Durante, net revenues from two packets of cigarettes sold in the US are equivalent to six packs in other developed markets, and as many as 13 packs in emerging markets. Combined revenues from the merged group would be around $26bn. Reynolds is the #2 in US cigarettes behind Altria's Philip Morris USA, but the local leader in electronic cigarettes. Most observers expect Altria to respond by proposing the reunification of Philip Morris USA with Philip Morris International, spun off as a separate company in 2008.
Adbrands Weekly Update 27th Oct 2016: British American Tobacco has offered to buy the 58% of equity it doesn't already own in the #2 US tobacco group Reynolds American for $47bn in cash and stock. BAT acquired a 42% holding in Reynolds following the transfer of its own Brown & Williamson business in 2004. Since then, BAT has had no direct presence in the US market. The bid has yet to be accepted by Reynolds. According to insiders, that company is seeking a better price. A combination of the two businesses would create the world's biggest tobacco company by revenues, though it would continue to sit behind Philip Morris International by global market share. The key attraction of Reynolds to BAT, besides access to the US market, is the smaller company's expertise in alternative tobacco products.
Adbrands Weekly Update 4th Sept 2014: British American Tobacco, owner of Lucky Strike, Pall Mall and other cigarette brands, named Andrew Gray as its new group marketing director, taking over from Jean-Marc Levy, who is due to retire at the end of the year.
Adbrands Weekly Update 17th Jul 2014: US tobacco companies Reynolds American and Lorillard agreed terms for a merger to create a stronger rival to local leader Altria, whose Marlboro brand still dominates the sector with more than 40% market share. Other brands contribute to Altria's total share in 2013 of just under 46%. Currently, #2 player Reynolds is some way behind at 24.7%, from products such as Pall Mall and Camel, but its share has been in slow decline for several years. Third-ranked Lorillard, on the other hand, has been growing because of the popularity of its menthol brand Newport, now the second best-selling cigarette after Marlboro. In 2013, its market share rose to 13.6%. Under the deal unveiled this week, Reynolds would acquire Lorillard for around $27.4bn in cash and stock. In order to ease regulatory concerns over the reduction of competition in what is already a highly controversial sector, Reynolds and Lorillard are also offering to divest several brands. Much smaller Imperial Tobacco, maker of discount brand USA Gold, has been lined up to acquire Reynolds' Winston, Salem and Kool brands, as well as Lorillard's Maverick and top-selling Blu e-cigarette brand, for around $7.1bn. That would reduce Reynolds/Lorillard's combined share to a little over 35% and lift Imperial to over 9%. At the same time, British American Tobacco, the largest shareholder in Reynolds, is investing $4.7bn in order to maintain its 42% holding in the merged group. The extraordinarily complex deal will require the approval of three sets of shareholders and is also likely to entail a long regulatory investigation.
Adbrands Weekly Update 20th Feb 2014: British television hosted the first ad from a tobacco company since at least 1991 this week to promote the Vype brand of e-cigarettes, developed by British American Tobacco's Nicoventures subsidiary. That represents a significant commercial breakthrough for a sector that has already met with hesitant support from some anti-smoking bodies. Cigarette ads were banned on British television in the 1960s, and advertising for cigars and other smoking-related products were finally eliminated in 1991 with a comprehensive ban that still prohibits all tobacco or smoking-related imagery. However, e-cigarettes fall under the same general categorisation as smoking cessation products like nicotine patches. As a result the broadcast version of the ad can't show the product, because of its physical resemblance to a cigarette; nor can it use its slogan "satisfaction for smokers"; instead the ad replaces the word "smokers" with "vapers", which has become recognised as the generic term for e-cig users. However, fears remain in some quarters that a rise in popularity of e-cigs could encourage users to move on to traditional tobacco.
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