LONDON — British American Tobacco has offered to buy out Reynolds American Inc. for $47 billion in an attempt to gain a strong presence in the U.S., a lucrative market where sales of electronic cigarettes are booming as traditional smoking fades.
The takeover would create the world’s largest publicly traded tobacco company and combine BAT’s presence in developing countries, where anti-smoking campaigns are not as strong as in the U.S. and Europe, with Reynolds’ almost exclusive focus on the U.S.
BAT already owns 42 percent of Reynolds and sells Dunhill, Rothmans and Lucky Strike cigarettes. Reynolds controls about a third of the U.S. market with brands like Newport, Camel and Pall Mall.
Though smoking in the U.S. is declining, it remains “the largest global profit pool” outside of China, BAT said in a statement Friday. The U.S. is one of the biggest markets for e-cigarettes.
“BAT and Reynolds American have a strong existing relationship, and while cost savings will be relatively modest, the full access this acquisition would give BAT to the U.S. — a lucrative, consolidated market with high barriers to entry — means it makes eminent sense,” Shane MacGuill, head of tobacco at Euromonitor International, said by email.
The deal is the latest attempted merger in the industry as tobacco companies face weakening demand in developed markets. Only last year, Reynolds American acquired Lorillard, the maker of Newport, the U.S.’s best-selling menthol cigarette brand.
The two companies already have a technology-sharing agreement in the development of electronic cigarettes.
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,” Chief Executive Nicandro Durante said in a statement.
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 U.S.