Smoke Signals Rising from London Headquarters of BAT Suggest Tobacco Giant is on Verge of Mega Deal

Source from:  Mail Online  07/18/2014

Smoke signals rising from Temple Place, the London headquarters of British American Tobacco, suggested that the tobacco giant is on the verge of a mega deal.

Its shares lost 19.5p to 3555.5p amid growing speculation it is ready to splash out billions of pounds buying the 58 per cent of US rival Reynolds American it does not already own.

In doing so, it would stub out any plans America's second largest tobacco group might already have to buy electronic cigarette maker and Newport menthol cigarette seller Lorillard, in a deal which has rumoured to be worth in excess of $20bn.

BAT already owns 42 per cent of Reynolds American, whose brands include Camel, Kool, Winston and Salem, and which is responsible for about one of every three cigarettes sold in the US.

A standstill agreement between the two groups expires at the end of the month and then Bats will be free to bid for the minority not already owned.

Reynolds American's shares traded around $61.40 in New York early yesterday and rumours were rife that BAT could be willing to pay north of $75 a share to gain full control.

Broker Citigroup has said that it would be advantageous for BAT to buy Reynolds. Acquiring Reynolds would boost BAT's earnings per share by about 10-13 per cent, and give it ownership of what appears to be one of the best e-cigarette platforms globally, and access to Reynolds' heat-not-burn technology. A takeover would allow BAT 'total freedom to deploy Reynolds' intellectual property on e-cigarettes.

School will soon be out for summer and many fund managers will be heading off with the family to sunnier climes.

So with the US second quarter reporting season imminent, now is a good time to lock in some profits accrued over the past quarter or so. Despite the British Chambers of Commerce warning for the Bank of England not to make any 'hasty decisions' on raising interest rates, the Footsie dropped 85.06 points to 6,738.45, while the FTSE 250 fell 239.82 points or 1.5 per cent to 15,652.48. Wall Street closed 117.59 points off at 16,906.62 as dealers awaited aluminium giant Alcoa to kick off the second-quarter reporting season.　Enditem