BAT offers to buy Reynolds American in a $47 billion deal that could create the world's biggest listed tobacco company in a sector battling with a decline in traditional smoking. Ivor Bennett reports.
It's an industry that relies on people inhaling, but could it be running out of puff? British American Tobacco's 47 billion dollar offer for US rival Reynolds a sign that big tobacco is getting smaller. SOUNDBITE (English) JASPER LAWLER, MARKET ANALYST, CMC MARKETS, SAYING: "I think this is just a necessary for the industry. It's declining in a big part of the developed world and it needs to spread its access and be able to control prices a bit more." Greater regulation and taxes are part of what's stubbing out growth along with more health conscious consumers. as smokers in developed markets increasingly switch to e-cigarettes. Teaming up with Reynolds would give BAT more firepower in developing markets like Russia, Vietnam and Turkey. Where premium brands like Camel are still flying off the shelves. SOUNDBITE (English) JASPER LAWLER, MARKET ANALYST, CMC MARKETS, SAYING: "Their reach is very global between the two and there's actually not too much overlap. So it may not face the kind of regulatory hurdles in terms of competition that some of these companies do." There was a sense in Britain at least, that the appetite for mergers had gone up in smoke after the post-Brexit fall in sterling. But the weak pound also sent BAT shares to an all-time high investors betting it'll boost revenues, since most are made abroad. SOUNDBITE (English) JASPER LAWLER, MARKET ANALYST, CMC MARKETS, SAYING: "These are areas that income investors can feel safe about investing into. And I don't think that this merger would undermine that. I think that probably the consolidation just reinforces that fact." BAT estimates the merger will generate 400 million dollars worth of savings. In what would be the world's biggest listed tobacco company.