RJ Reynolds Tob (NYSE:RJR)
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FTC Clears Proposed Combination of R.J. Reynolds Tobacco Co. and
Brown & Williamson Corp.
WINSTON-SALEM, N.C., June 22 /PRNewswire-FirstCall/ -- R.J. Reynolds Tobacco
Holdings, Inc. (NYSE:RJR) and British American Tobacco p.l.c. (AMEX:BTI) today
confirmed that the U.S. Federal Trade Commission has closed its investigation
and will not challenge the companies' plan to combine R.J. Reynolds Tobacco Co.
(RJRT) and the U.S. business of Brown & Williamson Tobacco Corp. (B&W).
The agreement to combine RJRT and B&W's U.S. business provides for establishing
a new publicly traded holding company called Reynolds American Inc. In
addition, Reynolds American Inc. will pay $400 million in cash to acquire Lane
Limited, which manufactures several cigar, roll-your-own and pipe tobacco
brands and distributes Dunhill tobacco products.
The FTC commissioners' unanimous vote marked the completion of the antitrust
review process. As the company has previously stated, four key rulings and
approvals are necessary to close the transaction: clearance by the FTC,
rulings from the U.S. Internal Revenue Service (IRS) regarding the tax-free
status of the transaction, clearance by the Securities and Exchange Commission
(SEC) of the proxy statement/prospectus for shareholders, and RJR shareholder
approval. On June 22, 2004, the companies received favorable private-letter
rulings from the IRS, establishing that the transaction will be tax-free to RJR
shareholders and B&W's parent company, British American Tobacco p.l.c.
(AMEX:BTI).
RJR will issue a press release when it files an amended registration statement
with the SEC on Form S-4 containing the proxy statement/prospectus for RJR
shareholders, which will include the date of a special shareholder meeting.
The companies expect the transaction to close by the end of July.
"We are pleased with the FTC decision, which allows our proposed business
combination to proceed as planned," said Andrew J. Schindler, chairman and CEO
of R.J. Reynolds Tobacco Holdings. "The combination of RJRT and B&W's U.S.
business, and the acquisition of Lane Limited, mark an extremely positive step
for RJR shareholders. The creation of Reynolds American Inc. and the
combination of RJRT and B&W will enable us to achieve tremendous efficiencies,
and will greatly enhance the combined companies' ability to compete effectively
in the U.S. marketplace. The combination is expected to be accretive to
earnings, and improve shareholder value. We estimate the combination of the
companies will generate at least $500 million in synergies once full
integration is complete - which we expect will be about 18 to 24 months after
the deal closes."
"I am delighted that the uncertainty over the planned merger is now largely
over," said Martin Broughton, chairman of British American Tobacco. "The
creation of Reynolds American will give the Group a 42 percent share in a
stronger and more sustainable business, while improving both our earnings per
share and our cash flow in the first full year following completion. It's a
great deal for everybody and will have been worth the wait."
Reynolds Tobacco is the second-largest U.S. cigarette manufacturer and
marketer. RJRT's key brands include Camel, Salem, Winston and Doral. Brown &
Williamson is the third-largest domestic cigarette company. B&W's brands
include KOOL, Pall Mall, Lucky Strike and Misty.
Forward-Looking Information
Statements included in this news release which are not historical in nature are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward- looking statements
regarding RJR's future performance and financial results include risks and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. These risks include the
substantial and increasing regulation and taxation of the cigarette industry;
various legal actions, proceedings and claims relating to the sale,
distribution, manufacture, development, advertising, marketing and claimed
health effects of cigarettes that are pending or may be instituted against RJR
or its subsidiaries; the substantial payment obligations and limitations on the
advertising and marketing of cigarettes under various litigation settlement
agreements; the continuing decline in volume in the domestic cigarette
industry; competition from other cigarette manufacturers, including increased
promotional activities and the growth of the deep-discount category; the
success or failure of new product innovations and acquisitions; the
responsiveness of both the trade and consumers to new products and marketing
and promotional programs; any potential costs or savings associated with
realigning the cost structure of RJR and its subsidiaries; the ability to
achieve efficiencies in manufacturing and distribution operations without
negatively affecting sales; the cost of tobacco leaf and other raw materials
and commodities used in products; the effect of market conditions on the
performance of pension assets, foreign currency exchange rate risk, interest
rate risk and the return on corporate cash; and the ratings of RJR securities.
In addition, RJR can give no assurance that the proposed formation of Reynolds
American Inc., the combination of RJRT and the U.S. assets, liabilities and
operations of B&W, and the related transactions, will be consummated, or if
consummated, that any expectations relating thereto will be realized. Factors
that could affect whether these transactions are consummated include obtaining
clearance by the SEC, the approval of RJR shareholders, and the satisfaction or
waiver of certain other conditions. Due to these uncertainties and risks,
undue reliance should not be placed on these forward-looking statements, which
speak only as of the date of this news release. Except as provided by federal
securities laws, RJR is not required to publicly update or revise any forward-
looking statement, whether as a result of new information, future events or
otherwise.
Additional Information and Where To Find It
Reynolds American Inc., the holding company formed in connection with the
proposed business combination, has filed a registration statement on Form S-4
that includes a preliminary proxy statement/prospectus and other relevant
documents in connection with the proposed business combination. When the
registration statement becomes effective, a final proxy statement/prospectus
and other relevant documents will be mailed to RJR shareholders. INVESTORS AND
SECURITY HOLDERS OF RJR ARE URGED TO READ THESE DOCUMENTS WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
BUSINESS COMBINATION. Documents filed by RJR and Reynolds American Inc. with
the SEC can be found at the SEC's Web site at http://www.sec.gov/ . Once
available, free copies of the final prospectus/proxy statement, as well as
RJR's and Reynolds American Inc.'s related filings with the SEC, also may be
obtained from RJR by directing a request to R.J. Reynolds Tobacco Holdings,
Inc. at P.O. Box 2866, Winston-Salem, NC 27102-2866, Attn.: Office of
Investor Relations, or by telephone at (336) 741-5165 or on RJR's Web site,
http://www.rjrholdings.com/ .
Interests of Participants
RJR, its directors and executive officers and certain other members of
management and employees may be deemed to be participants in the solicitation
of proxies from RJR shareholders in favor of the proposed business combination.
A description of the interests of the directors and executive officers of RJR
is set forth in the prospectus/proxy statement and the other relevant documents
filed with the SEC.
R.J. Reynolds Tobacco Holdings, Inc. is the parent company of R.J. Reynolds
Tobacco Company and Santa Fe Natural Tobacco Company, Inc. R.J. Reynolds
Tobacco Company is the second-largest tobacco company in the United States,
manufacturing about one of every five cigarettes sold in the United States.
Reynolds Tobacco's product line includes four of the nation's 10 best-selling
cigarette brands: Camel, Winston, Salem and Doral. Santa Fe Natural Tobacco
Company, Inc. manufactures Natural American Spirit cigarettes and other tobacco
products, and markets them both nationally and internationally. Copies of
RJR's news releases, annual reports, SEC filings and other financial materials
are available on the company's Web site, http://www.rjrholdings.com/ .
DATASOURCE: R.J. Reynolds Tobacco Holdings, Inc.
CONTACT: Maura Payne of R.J. Reynolds, +1-336-741-6996, or cell,
+1-336-829-9024; or David Betteridge, 011-44-20-7845-2888, or Ralph Edmondson,
011-44-20-7845-1180, both of British American Tobacco p.l.c.
Web site: http://www.rjrholdings.com/