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Debora Cartagena, USCDCP
BAT will pay $ 49 billion for 58% stake in Reynolds, which is 26% more than value of Reynolds in October 2016, when BAT first announced its intention to purchase a controlling stake of its competitor. Since then, the companies have been negotiating about conditions of the merger. After the BAT raised the amount to $ 2 billion, Reynolds agreed to a deal. BAT already owns remaining 42% in Reynolds.
The merger will bring into being the world’s largest tobacco company by revenue size. Now BAT is the second-largest tobacco company in the world, after Philip Morris International. Some of its brands are Dunhill, Lucky Strike and Pall Mall. Reynolds is in sixth place, it owns brands such as Camel and Newport. According to BAT, synergies from the deal would save at least $ 400 million. Boards of directors of both companies recommend that their shareholders accept the deal. If it goes wrong for some reason, a guilty side will have to pay penalty 1 billion of penalty.
The two companies got themselves into the deal to consolidate efforts and reduce costs on the background of global anti-smoking campaigns and rapidly dwindling number of smokers. Market observers do not exclude that the merger may cause a new round of acquisitions in the global tobacco market. Already, experts are wondering which of BAT and Reynolds’ competitors - Philip Morris, Japan Tobacco or Imperial Brands - would be next to enter merger talks.
Steve Clayton, manager of British investment company Hargreaves Lansdown told to BBC: "BAT’s size after the deal is increasing pressure on other top players. Particular attention is now drawn to Imperial Brands (the fourth largest producer in the world, owns Davidoff, West, Gauloises and others). It is increasingly resembling a small fish, which found itself in fish bowl with other larger and hungry fish."
According to the World Health Organization report (WHO) and the US National Cancer Institute, there are just 1.1 billion smokers in the world aged 15 years and older. About 226 million of them live in poverty.
The experts say that a small tax increase of $ 0.8 on each pack of cigarettes would allow governments to receive additional $ 140 billion a year. This would lead to 42% higher prices for tobacco products and 9% decrease in the number of smokers in the world (66 million people). Experts point out that increase in prices for tobacco products can significantly increase government revenues with a view to their further use in health and development needs.
The report's authors emphasize that "market power of tobacco companies has grown in recent years." In 2014, the five largest companies controlled 85% of the global cigarette market. Policies aimed at limiting their impact "promise to lead to a reduction in tobacco consumption", the experts say.
source: bbc.co.uk
The merger will bring into being the world’s largest tobacco company by revenue size. Now BAT is the second-largest tobacco company in the world, after Philip Morris International. Some of its brands are Dunhill, Lucky Strike and Pall Mall. Reynolds is in sixth place, it owns brands such as Camel and Newport. According to BAT, synergies from the deal would save at least $ 400 million. Boards of directors of both companies recommend that their shareholders accept the deal. If it goes wrong for some reason, a guilty side will have to pay penalty 1 billion of penalty.
The two companies got themselves into the deal to consolidate efforts and reduce costs on the background of global anti-smoking campaigns and rapidly dwindling number of smokers. Market observers do not exclude that the merger may cause a new round of acquisitions in the global tobacco market. Already, experts are wondering which of BAT and Reynolds’ competitors - Philip Morris, Japan Tobacco or Imperial Brands - would be next to enter merger talks.
Steve Clayton, manager of British investment company Hargreaves Lansdown told to BBC: "BAT’s size after the deal is increasing pressure on other top players. Particular attention is now drawn to Imperial Brands (the fourth largest producer in the world, owns Davidoff, West, Gauloises and others). It is increasingly resembling a small fish, which found itself in fish bowl with other larger and hungry fish."
According to the World Health Organization report (WHO) and the US National Cancer Institute, there are just 1.1 billion smokers in the world aged 15 years and older. About 226 million of them live in poverty.
The experts say that a small tax increase of $ 0.8 on each pack of cigarettes would allow governments to receive additional $ 140 billion a year. This would lead to 42% higher prices for tobacco products and 9% decrease in the number of smokers in the world (66 million people). Experts point out that increase in prices for tobacco products can significantly increase government revenues with a view to their further use in health and development needs.
The report's authors emphasize that "market power of tobacco companies has grown in recent years." In 2014, the five largest companies controlled 85% of the global cigarette market. Policies aimed at limiting their impact "promise to lead to a reduction in tobacco consumption", the experts say.
source: bbc.co.uk
