British American Tobacco buyout of Reynolds raises health worries
Health campaigners have criticised the British American Tobacco (BAT) buyout of US firm Reynolds, which was approved by shareholders of both companies on Wednesday. The move, which will establish the world’s largest tobacco firm, came on the same day that the World Health Organization released a report into the actions of tobacco companies which are fighting anti-smoking laws across the world. BAT was one of the companies implicated in a recent Guardian investigation into attempts by tobacco companies to undermine smoking regulation in eight African countries.



British American Tobacco (BAT) has come under fire from health campaigners after shareholders approved its buyout of American firm Reynolds on Wednesday, which will create the world’s biggest tobacco company.

Shareholders of both companies approved the deal, which will take BAT back into the US market after a 12-year absence. It ends American ownership of Reynolds American Incorporated (RAI), a tobacco company headquartered in the US south since 1875.

The move is also expected to speed up the development of e-cigarettes and vapes.

The deal was backed by nearly all shareholders who voted at a special meeting at the Hilton London Bankside in London (78.2% of investors voted). At Reynolds headquarters in Winston-Salem, North Carolina, meanwhile, the vast majority (82.%) of Reynolds shares approved the deal.

BAT is buying the 57.8% of Reynolds it does not already own. The cash-and-stock offer announced in January valued each Reynolds share at $59.64, up from $56.50 offered in October. The deal is expected to complete by next Tuesday.

BAT is one of the multinational tobacco companies that have threatened governments in at least eight countries in Africa to block or dilute new regulations to limit the harm caused by smoking, a Guardian investigation found last week. BAT says it is not against all regulation but sometimes needed to intervene.

The merger vote comes the same day that the World Health Organization (WHO) released a report on tobacco companies push against anti-smoking laws worldwide. WHO’s director-general, Dr Tedros Adhanom Ghebreyesus, said “governments around the world must waste no time” in enacting the laws.

Farm worker activists in the US said they were anxious around the growing power of tobacco firms in response to the merger.

In London, Nicandro Durante, the BAT chief executive, welcomed the “overwhelming support” for the acquisition from both sets of shareholders. He added: “We look forward to welcoming Reynolds group employees to British American Tobacco and to realising the benefits of operating these two great companies as one stronger, global tobacco and Next Generation Products business with direct access for our products across the most attractive markets in the world.”

The deal brings together BAT’s Lucky Strike, Dunhill, Rothmans and Benson & Hedges cigarettes with Reynolds’ Pall Mall, Newport and Camel.

But Deborah Arnott, chief executive of UK public health charity Action on Smoking and Health (ASH), was worried what the creation of an even bigger business would mean for the growing tobacco epidemic in poorer countries. “By taking over Reynolds, BAT, already one of the top five companies in the FTSE 100, is now the largest tobacco company in the world.

“Despite all the talk during the merger negotiations of the importance of ‘next generation products’ BAT is still clearly focused on flogging fags to low- and middle-income countries. As a result, it is hardly surprising that the tobacco epidemic is still growing in such countries rather than on the wane as it is in the UK and the US.

“We find it particularly shameful that a British company, BAT, is so dominant in Commonwealth countries like those in Africa, where it has been exposed for its continued use of intimidatory tactics. Ironically this is at the same time that the British government has committed £15m in aid funding to help governments tackle the epidemic and drive down smoking rates.”

Arnott said companies were only serious about promoting e-cigarettes and vapes as alternatives to smoking in high-income, western countries.

‘Industry with the deepest pockets’

For shareholders at Reynolds headquarters in Winston-Salem, the focus was on the end of an era for the American company, despite recent (and historic) criticism of its business. “This would be the last meeting of RAI as an independent entity,” said Virgil Goode, a 70-year-old shareholder who traveled from Rocky Mount, Virginia, for the vote, and praised Reynolds as an employer.



His spouse, 53-year-old Lucy Goode, said several generations of men in her family had worked for one or the other tobacco company. Her grandfather, brother-in-law and nephew had all worked at RAI at some point. Her father worked for Brown & Williamson, BAT’s former US subsidiary. “It provided a good income for them for a number of years,” said Lucy Goode.

Reynolds produces some of the bestselling cigarette brands in the nation, including increasingly popular menthol cigarettes under the Newport brand, as well as Camels. The company was founded as a chewing tobacco company in 1875 in Winston-Salem by Richard Joshua Reynolds.

The 2004 merger between Reynolds and BAT’s US subsidiary Brown & Williamson lead to the events Wednesday, but was not the companies’ first interaction. BAT has owned 42% of Reynolds since the company purchased Brown & Williamson 13 years ago.

BAT’s initial purchase of Reynolds shares came with an agreement that it could not buy the remaining lot of Reynolds for 10 years. Reynolds currently employs about 2,000 people in the area, not including surrounding farms that supply tobacco to the companies. For many in Winston-Salem, where Reynolds has long been headquartered, the acquisition by the British giant has been expected for years.

In fact, the two companies’ ties go back much further. At the beginning of the 20th century, the giant monopoly American Tobacco Company, headed by James “Buck” Duke, once controlled nearly all of the US tobacco market, including firms, such as Lucky Strike and Reynolds. In addition, American Tobacco Company struck an agreement with Imperial Tobacco in the UK. But in 1911, the US government succeeded in its efforts to break up the monopoly, and the American tobacco giant RJ Reynolds, as well as British American Tobacco, were born out of American Tobacco Company’s dissolution.

Today, though smoking hasn’t retained the glamor it had in the 1960s, tobacco companies have remained profitable. In part, companies have been able to shift sales of cigarettes to less educated and poorer consumers. They have also weathered lawsuits and regulations of the 1990s.

Tobacco companies, such as Reynolds, continue to donate to politicians. RAI donated $1m to Donald Trump’s inauguration fund, and officials with deep ties to the company have been nominated for high-profile government posts.

The merger will put profits from eight out of a 10 cigarettes sold in the US into the pockets of two companies, Marlboro-maker Altria and BAT. The merger has led to speculation that Altria could again be purchased by Philip Morris International, the larger company that spun-off the American affiliate.

President of the Farm Labor Organizing Committee, Baldemar Velasquez, said the merger has pushed him to take the fight for fair, organized labor worldwide. “The supply chain is globalized, and they put one poor group against another,” said Velasquez. “Tobacco is the one crop that runs through the agriculture industry – it’s the most lucrative crop, and it’s the industry with the deepest pockets.”

Asked about whether the behaviour of tobacco firms ever figured into the Goode’s decision to remain shareholders, Virgil Goode said, smoking is “a choice people make, and I’m not a smoker. Never have been”.

One Winston-Salem resident who refused to give his name called the deal “bittersweet”. He said the deal was “good for shareholders,” but that “there’s a little bit of civic pride in having an independent company here in Winston-Salem”, before rushing off.





