BAT/Reynolds talks hit a bump over ‘heat vs burn’ technology - report
Merger talks between Reynolds [NYSE:RAI] and British American Tobacco [LON:BATS] have hit a bump over the valuation of Reynolds’ technology which heats tobacco rather than burning it, The Sunday Telegraph reported.
BAT, already a 42% shareholder in Reynolds, is eager to get its hands on Reynold’s purportedly safer and more advanced technology to enable it to compete better against its competitor Philip Morris, the report said, quoting Owen Bennett, an analyst with Jefferies.
Boosting its standing among its rivals would offer BAT a significant incentive to increase its bid, Bennett said. Reynolds turned down a USD 56.50-per-share offer from BAT last October but is expected to agree a deal priced at approximately USD 60 per share, with a bigger cash component, according to Jefferies.
A BAT insider said the USD 1.6bn-plus cash flow generated by Reynolds was more important than access to the company’s technology, the item reported. The same source said no deadline has been set for the merger to be agreed.
According to people with close links to the talks, the two sides are also still discussing the exact mix of stock and cash which will make up the GBP 38bn (USD 47bn) deal, the report said.