Raising Fair Value of Reynolds American
We think the acquisition value of the company is on the upswing as a result of the continued rise in the market price of British American Tobacco.
We are raising our fair value estimate of
Our GBX 4,800 fair value estimate of BAT is unchanged because the underlying terms of the deal have not changed. At almost 11 times enterprise value/EBITDA, the deal is slightly above historical developed-market tobacco deals since 1998. It is very slightly value-destructive, in our view, although not by a material amount, and any value destruction will have been mitigated by the recent weakness in the British pound against the U.S. dollar, following the U.K.'s recent general election.
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