Reynolds American Inc. is officially a U.S. subsidiary of the world’s largest publicly traded tobacco manufacturer.
British American Tobacco Plc announced Tuesday it has completed the purchase of the 57.8 percent of Reynolds it did not already own.
The sale was reflected in a news release, a U.S. regulatory filing showing 100 percent ownership, and a change on Reynolds’ website reflecting it is the wholly owned U.S. subsidiary of BAT after 142 years of corporate independence.
It also represented the last day for Susan Cameron as Reynolds’ non-executive chairwoman. Cameron played the lead role in not only Reynolds merging with BAT but also its $29.25 billion purchase in June 2015 of Lorillard Inc,, essentially to acquire top-selling menthol cigarette Newport.
“We are very excited about forming a stronger, truly global tobacco and next-generation products company, bringing together the most talented people in our industry,” said Debra Crew, who retains her role as chief executive and president under BAT ownership.
“BAT clearly recognizes the importance and expertise of the employees of the Reynolds companies, the quality of our customer network and the strength of our portfolio of brands,” Crew said.
“Moving forward, RAI will work closely with its employees, as well as with its business and community partners, to ensure this transaction results in an even stronger company.”
BAT paid $54.5 billion for total ownership. Reynolds’ stock will be delisted from the New York Stock Exchange and S&P indices at the close of trading Tuesday.
Reynolds’ independent board members approved BAT’s offer Jan. 17. Legacy Reynolds shareholders now own 19 percent of BAT.
“This is a transformational deal,” BAT Chief Executive Nicandro Durante said in a statement. “We will take the best of the best from both businesses across all areas to create a stronger, more sustainable company.
Another regulatory filing focuses on how the completion of the deal affects Reynolds’ 401(k) plan.
Winston-Salem now has just two Fortune 500 companies in BB&T Corp. and Hanesbrands Inc.
Rockwell Collins, another Fortune 500 company, has a major U.S. production and operation hub in Winston-Salem.
2004 deal set stage
Reynolds American was formed in 2004 following R.J. Reynolds Tobacco Holdings Inc.’s $4.4 billion purchase of Brown & Williamson Tobacco Corp. — BAT’s U.S. subsidiary at that time. BAT gained 42.2 percent ownership of Reynolds at that time, giving it a measure of internal insight into a competitor seldom seen in corporate America.
“BAT now has a balanced presence in high-growth emerging markets and high-profitability developed markets, combined with direct access to the attractive U.S. market,” Durante said.
Durante said adding Reynolds’ products, most notably top-selling menthol cigarette Newport and top-selling electronic cigarette Vuse, will help increase BAT’s profitability.
“It provides further support to the company’s continued commitment to a dividend payout ratio of at least 65 percent and a strong financial profile, targeting a solid investment grade credit rating through progressive de-leveraging,” Durante said.
BAT said in a Jan. 18 regulatory filing that it “has no plans to close or move the head office in Winston-Salem, nor make any significant changes to the current high-quality manufacturing facilities in North Carolina and Tennessee, nor to the trade marketing team.” Reynolds has an American Snuff production plant in Tennessee.
Durante has told BAT shareholders the company projects $400 million in cost savings by July 2020.
Reynolds is estimated to have between 2,000 and 2,200 local employees, the majority of whom work at its plant in Tobaccoville, as well as about 5,500 full-time and 50 part-time as of Dec. 31, 2016. The total includes 3,700 Reynolds Tobacco, 500 Santa Fe Natural Tobacco Co. Inc. and 600 American Snuff Co. LLC employees.
The bulk of the remaining Reynolds Tobacco employees are sales and marketing representatives out in the field serving retail, wholesale and distribution customers, as well as about half of Santa Fe’s workforce.
Reynolds Tobacco confirmed June 20 it has offered select production workers a voluntary retirement package. It has not said how many employees took the package.
Reynolds officials said its final quarterly report would be issued in a regulatory filing in early August.
“Work has already begun to realize the projected cost synergies, and we are committed to driving continued, sustainable profit growth and returns for shareholders long into the future,” Durante said.
‘Business as usual’
Gayle Anderson, president and chief executive of the Winston-Salem Chamber of Commerce, said Tuesday that “I believe it very much will be business as usual.
“The Reynolds American name is not changing, and the office headquarters is going to remain as is. Manufacturing will continue at Tobaccoville. We do not expect any significant changes in the workforce.
“The only major change relates to no longer being a publicly traded company, and for most people in Winston-Salem, that is not material,” Anderson said.
Mayor Allen Joines said he has received “assurances that we should not expect any significant changes in operations or head count. I am hopeful it will offer some additional opportunities for growth.”
Bowman Gray IV, a descendant of former Reynolds chief executive Bowman Gray Sr., and a local independent stock broker, had said the sale of Reynolds to BAT was destined to happen, given the shrinking U.S. tobacco marketplace and pressures to maintain a high dividend to stockholders.
Gray’s great-grandfather, Bowman Gray Sr., was the first person to be named as Reynolds’ president and chairman who was not a Reynolds family member. Bowman Gray Jr. served as chairman of Reynolds during its heyday as the world’s top tobacco manufacturer.
“I am looking forward to this next chapter for Reynolds, as I believe they will continue to evolve and re-hydrate their product lines in many areas, especially the vapor technologies,” Gray said.