British American Tobacco Plc (BAT) Buys Reynolds American, Inc. (RAI)

British American Tobacco Plc (NYSEMKT:BTI) has agreed to acquire Reynolds American, Inc. (NYSE:RAI).

Reynolds American, Inc.Two of the world’s largest tobacco companies are joining forces, creating a behemoth of a corporation that will include Camel, Lucky Strike, Newport, Kent and other brands under the same company.

The merger makes sense as traditional tobacco companies are facing a reduction in their business due to the rise of vaping and e-cigarettes. British American Tobacco already owned a stake of Reynolds American and initially offered $47 billion for the remaining 57.8% of the company.

The new company will be “stronger,” according to British American Tobacco CEO Nicandro Durante, who said the move will offer customers direct access to products from both companies. “We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future,” he added.

The combined company will result in annual savings of about $400 million. Reynolds American CEO Susan Cameron also praised the move as the new British American Tobacco will have a strong presence of traditional tobacco products, as well as vapor and tobacco-heating products.

Reynolds alone has a 34% of the cigarette share in the U.S., while the combined company has a large presence around the world, including the Middle East, South America, Africa and Asia.

BTI shares fell 2.1% Tuesday, while RAI stock gained 3% on the news.

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