RAI

Reynolds American Inc

Consumer, Event Driven/Special Sit


Presented:03/01/2017
Price:$61.93
Cap:$88.48B
Current Price:$65.40
Cap:$93.27B

Presented

Date03/01/2017
Price$61.93
Market Cap$88.48B
Ent Value$91.18B
P/E Ratio14.57x
Book Value$15.23
Div Yield0.03%
Shares O/S1,428.75M
Ave Daily Vol7,394,867
Short IntN/A

Current

Price$65.40
Market Cap$93.27B
Reynolds American Inc. is a holding company, which manufactures and sells cigarettes in United States. The company operating segments include RJR Tobacco, American Snuff and Santa Fe. The RJR Tobacco segment consists of the primary operations of R. J. Reynolds Tobacco Company. The American Snuff segment consists of the primary operations of American Snuff Co. The Santa Fe segment consists of the primary operations of SFNTC, Niconovum AB, Niconovum USA, Inc. and RJR Vapor. Reynolds American was founded on January 2, 2004 and is headquartered in Winston-Salem, NC.

Publicly traded companies mentioned herein: British American Tobacco PLC (BATS LN), Reynolds American Inc (RAI)

Highlights

The presenter is long shares of Reynolds American (RAI) and thinks investors could see upside heading into the deal with BAT closing. BAT offered to buy the remaining 58% of the stock (it owned 42% already) for nearly $50 billion, and the deal could take six months to close due to issues with establishing an ADR, said the presenter. Reynolds is a solid tobacco company and in his opinion the stock was unnecessarily trading at a discount to its fair value because of a perceived negative control situation. Thus, it is his opinion that the premium being paid is not substantial. And, tobacco companies are generally full tax payers and BAT is not taking the benefits of tax reform into consideration in its guidance ($400mm of synergies by the end of year three, and mid-single-digit EPS accretion in year three).

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Idea Discussion

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