Bat Reynolds Merger Agreement

“We are very pleased to have reached an agreement with Reynolds` Transaction Committee and Board of Directors and look forward to presenting the recommended offer to shareholders. We have been shareholders of Reynolds since 2004 and have benefited from the success of the current management team`s strategy, including the acquisition of Lorillard, which we supported in 2015 with our own investments. BAT has consistently implemented a successful strategy and has a proven track record in delivering strong results and returns to its shareholders, while successfully investing in future growth. Our combination with Reynolds will benefit from the use of the best talent from both organizations. It will create a stronger global tobacco and NGP business, with direct access to our products in the world`s most attractive markets. We believe this will result in sustained and sustainable growth in earnings and returns for shareholders for a long time in the future. The parties expect the transaction to close in the third quarter of 2017, subject to the agreement of BAT and De Reynolds shareholders; obtaining antitrust authorizations in the United States and Japan; Registering MTD shares with the SEC; approval of BAT shares for the listing of LSE and MTD ADRs on the NYSE; and other usual conditions. The conclusion of the transaction is not subject to a financing condition. On January 17, 2017, at 08:30 GMT, the conference call and web information conference call are hosting a conference call and live webcast to discuss the merger agreement. The merger would bring together some of the tobacco industry`s best-known brands, including Lucky Strike, Rothmans, Dunhill and Camel Cigarettes. BAT estimates that the merger will result in $400 million in cost savings.

British American Tobacco plans to merge Reynolds for $47 billion. The transaction will be completed through a legal merger in the United States, which will receive $29.44 in cash to Reynolds shareholders, with the exception of BAT, and 0.5260 pound common shares, represented by the New York Stock Exchange-listed BAT ADRs for each of their Reynolds shares. BAT intends to submit the merger agreement and other relevant documents to the SEC, and these documents can be accessed free of charge on the SEC`s website, These are expected to be available later today. If the MTD Board of Directors or Reynolds` Board of Directors decides, in accordance with its fiduciary duties, to withdraw or withdraw its recommendation to its shareholders, to vote in favour of the transaction and to terminate the merger agreement, that party should pay a $1 billion break fee to the other party. Under certain circumstances, the party entering into the competing transaction would be required to pay a $1 billion break fee if the merger agreement is terminated and a competing transaction is completed within 12 months of the end of that transaction. In the event that (a) certain antitrust authorizations are not obtained or (b) that an antitrust authorization is subject to withdrawals or other corrective action and BAT does not accept such conditions and therefore does not enter into such a transaction, BAT must pay a $500 million agreement fee to Reynolds. The fee for breaks loyal to the cartels would not be due in addition to the $1 billion break fee.

Durante said there was a clear rationale for bringing the groups together and that guidance in their relative trade multipliers allowed for an agreement. Certain statements contained in this communication on the proposed merger between Reynolds and BAT (the “proposed transaction”), the timing of the proposed transaction, the benefits and synergies of the proposed transaction, future opportunities for the combined business and any other statements regarding expectations, beliefs, beliefs, plans, objectives, financial conditions, assumptions, events or future achievements that are not historical facts are “forward-looking” statements within the meaning of Section 21E of the United States Securities Exchange Act of 1934.



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