Reynolds American — Merger or Acquisition (January 2017)
27 slides from Reynolds American's merger presentation, Jan 17, 2017
Slide 1: Proposed acquisition of RAI by BAT plc
Proposed acquisition of RAI by BAT plc Reynolds American Inc. Investor Presentation January 2017
Slide 2: Forward-Looking Information
Forward-Looking Information Statements included in this communication that are not historical in nature, including financial estimates and statements as to regulatory approvals and the expected timing, completion and effects of the proposed transaction, are forward-looking statements made pursuant t
Slide 3: Forward-Looking Information
Forward-Looking Information limitations put on RAI’s ability to pursue alternatives to the proposed transaction pursuant to the merger agreement; risks related to disruption of management time from ongoing business operations due to the proposed transaction; the failure to realize projected synergie
Slide 4: Other Information: Additional Information and Where to Find It
Other Information ADDITIONAL INFORMATION AND WHERE TO FIND IT This communication may be deemed to be solicitation material in respect of the proposed transaction involving RAI and BAT. In connection with the proposed transaction, BAT will file with the SEC a registration statement on Form F-4 that w
Slide 5: Other Information: Participants in Solicitation
Other Information PARTICIPANTS IN SOLICITATION RAI, BAT and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies from RAI shareholders in respect of the proposed transaction that will be described in the proxy statement/p
Slide 6: Adjusted vs. GAAP
Adjusted vs. GAAP RAI management uses ‘adjusted’ (non-GAAP) measurements to set performance goals and to measure the performance of the overall company, and believes that investors’ understanding of the underlying performance of the company’s continuing operations is enhanced through the disclosure
Slide 7: Transaction highlights
Transaction highlights Susan Cameron Executive Chairman
Slide 8: Transaction overview
Transaction overview Cash and stock transaction valuing RAI at $59.64 per share 26.4 percent premium to RAI stock price on Oct. 20, 2016 Approved by Transaction Committee of RAI board of directors and by RAI board Total RAI enterprise value of more than $95 billion Unique opportunity for future grow
Slide 9: Our Transformation Journey
Our Transformation Joume~ |=
Slide 10: Proven record capturing cost savings
Proven record capturing cost savings RAI Adj. Operating Margin 48.5% Reconciliation of GAAP to Adjusted results in Appendix 1 and 2 Results reflected in strong adjusted operating margin improvement Intense focus on efficiency Continuous productivity improvements
Slide 11: Excellent total shareholder return
Excellent total shareholder return Through Dec. 31, 2016 Source: Bloomberg Outpacing S&P 500 over the long term S&P 500 RAI 26% 151% 238% 488% 1,107%
Slide 12: Transaction review
Transaction review Andrew Gilchrist CFO
Slide 13: Transaction details
Transaction details Key offer terms RAI shareholders will receive US$29.44 in cash and BAT American Depositary Shares, representing 0.5260 of a BAT ordinary share, per RAI share Values each RAI share at approximately $59.64 Represents a premium of 26.4% to the RAI closing price on October 20, 2016 R
Slide 14: Premium to reference RAI share prices
Premium to reference RAI share prices Offer represents a premium of 26.4% to the RAI closing price on October 20, 2016 Compares favorably to control premiums paid in benchmark transactions where acquirer already owned between 30 - 49% of target Offer represents a 9.5% premium to all-time high RAI sh
Slide 15: Timeline
Timeline SEC process expected to take 4 to 5 months BAT plc will become a registrant and a reporting company under the US securities laws as part of the transaction. NYSE-listed Level III ADSs representing BAT ordinary shares will be issued to RAI shareholders as part of the deal consideration. RAI
Slide 16: Compelling Strategic and Financial Rationale
Compelling Strategic and Financial Rationale Strategic Rationale Compelling growth potential in a stronger, truly global tobacco company Continued significant exposure to the attractive, growing and profitable US market Additional exposure to leading positions in high growth emerging markets Distinc
Slide 17: Business & brand highlights
Business & brand highlights Debra Crew President and CEO
Slide 18: Opportunities in U.S. tobacco market
Opportunities in U.S. tobacco market Stable macroeconomic environment Manageable cigarette volume declines Attractive and profitable cigarette market Growth in moist-snuff volumes Interest in non-cigarette alternatives remains strong
Slide 19: RAI companies are well-positioned
RAI companies are well-positioned Cigarettes Snus Natural American Spirit cigarettes Moist Smokeless Tobacco Vapor NRTs
Slide 20: Range of distinctive brands driving growth
Range of distinctive brands driving growth Cigarettes Moist Snus Vapor HnB NRT
Slide 21: Strongest portfolio dynamics in U.S. industry
Strongest portfolio dynamics in U.S. industry No. 1 menthol cigarette brand; no. 2 cigarette brand No. 3 cigarette brand; leading total-tobacco brand No. 1 value cigarette brand No. 1 fastest growing premium cigarette brand No. 1 moist-snuff brand in Wintergreen and Pouches No. 1 vapor brand; superi
Slide 22: Competitive strengths
Competitive strengths Strong brand portfolio reflects risk continuum Leaders in innovation and new product commercialization Effective and efficient business strategies and operations Superior consumer and trade engagement capabilities High-performing culture drives performance
Slide 23: EPS has more than doubled since 2004
EPS has more than doubled since 2004 Reconciliation of GAAP to Adjusted results in Appendix 1 and 2 $0.83 $0.69 $2.27 to $2.33 (10/19/16) $2.57
Slide 24: Summary
Summary Combination Creates the World’s Largest Global Tobacco Company Transaction provides significant premium Appropriately values RAI growth opportunities Expected to close in Q3 2017 Unique opportunity for future growth in combined company
Slide 25: Q&A
Slide 26: Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results
Appendix 1 Reynolds American Inc. Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results (Dollars in Millions, Except Per Share Amounts) (Unaudited) RAI management uses “adjusted” (non-GAAP) measurements to set performance goals and to measure the performance of the overall company, and be
Slide 27: Reconciliation of GAAP to Adjusted Operating Income by Segment
Appendix 2 REYNOLDS AMERICAN INC. Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Operating Income by Segment (Dollars in Millions) (Unaudited) The RJR Tobacco segment consists of the primary operations of R.J. Reynolds Tobacco Company, the second-largest tobacco company in the United State
Reynolds American — Merger or Acquisition (January 2017) on 6ix