Reynolds American to BAT

Tobacco/Jan 2017/Goldman Sachs, JPMorgan, Lazard

Deal Information

Target

Reynolds American

Acquiror

BAT

Sector

Tobacco

Target Type

Public

Acquiror Type

Strategic

Advisors

Goldman Sachs, JPMorgan, Lazard

Transaction Metrics

Enterprise Value

EV / LTM Sales

EV / LTM EBITDA

15.4x

EV / Fwd EBITDA

Advisor Transaction Comparables

Comparable transactions cited by the advisor, excluding the subject transaction.

Advisor: Goldman Sachs

EV/LTM EBITDA selected range: 10.9x - 16.0x

14 comps


Jun 2015	TDR d.o.o.	BAT	$600M	-	12.5x	-
Mar 2015	Souza Cruz S.A.	BAT	$14.2B	-	16.0x	-
Jul 2014	Lorillard, Inc. The EV/LTM EBITDA multiple of 13.9x for this transaction was excluded from the calculation of the median, as such transaction involved significant geographic overlap and was not deemed to be comparable to the proposed transaction. It was referenced for information purposes only.	RAI	$27.6B	-	13.9x	-
May 2012	Gryson NV	Japan Tobacco Inc.	$600M	-	12.3x	-
May 2011	Productora Tabacalera de Colombia, S.A.S. (Protabaco)	BAT	$500M	-	11.3x	-
Jun 2009	PT Bentoel Internasional Investama Tbk	BAT	$700M	-	14.0x	-
Sep 2008	UST Inc.	Altria Group, Inc.	$11.7B	-	12.0x	-
Feb 2008	Skandinavisk Tobakskompagni A/S	BAT	$4.0B	-	11.2x	-
Feb 2008	Tekel	BAT	$1.7B	-	11.4x	-
Nov 2007	John Middleton, Inc.	Altria Group, Inc.	$2.9B	-	15.0x	-
Jul 2007	Altadis S.A.	Imperial Brands PLC	$22.4B	-	14.2x	-
Feb 2007	Commonwealth Brands, Inc.	Imperial Brands PLC	$1.9B	-	10.9x	-
Dec 2006	Gallaher Group PLC	Japan Tobacco Inc.	$18.5B	-	13.0x	-
Apr 2006	Conwood Company, LP, Conwood Sales Co., LP, Rosswil LLC and Scott Tobacco LLC	RAI	$3.5B	-	13.6x	-
	Mean			-	13.0x	-
	Median			-	12.8x	-

Advisor: JPMorgan

FV/LTM EBITDA selected range: 12.0x - 16.0x

19 comps


Jun 2015	TDR d.o.o.	BAT	$599M	-	12.5x	-
Feb 2015	Souza Cruz SA	BAT	$14.2B	-	16.0x	-
Jul 2014	Lorillard, Inc.	RAI	$27.9B	-	13.8x	-
Jul 2014	Lorillard, Inc. and RAI assets	Imperial Tobacco Group p.l.c.	$7.1B	-	8.8x	-
May 2011	Productora Tabacalera de Colombia, S.A.S. (Protabaco)	BAT	$452M	-	11.3x	-
Jun 2009	PT Bentoel Internasional Investama Tbk	BAT	$744M	-	14.0x	-
Sep 2008	UST Inc.	Altria Group Inc.	$11.7B	-	12.0x	-
Jul 2008	Rothmans Inc.	Philip Morris International Inc.	$1.9B	-	9.7x	-
Feb 2008	Skandinavisk Tobakskompagni	BAT	$4.1B	-	11.2x	-
Feb 2008	Tekel	BAT	$1.7B	-	11.4x	-
Nov 2007	John Middleton Co.	Philip Morris USA	$2.9B	-	15.8x	-
Jul 2007	Altadis SA	Imperial Tobacco Group p.l.c.	$22.6B	-	14.1x	-
Feb 2007	Commonwealth Brands Inc.	Imperial Tobacco Group p.l.c.	$1.9B	-	10.9x	-
Jan 2007	Lakson Tobacco Co. Ltd.	Philip Morris International Inc.	$675M	-	14.8x	-
Dec 2006	Gallaher Group plc	Japan Tobacco Inc.	$18.9B	-	13.0x	-
Apr 2006	Conwood LP	RAI	$3.5B	-	13.6x	-
Mar 2005	PT HM Sampoerna Tbk	Philip Morris International Inc.	$5.1B	-	13.9x	-
Mar 2002	Reemtsma Cigarettenfabriken GmbH	Imperial Tobacco Group p.l.c.	$5.1B	-	13.4x	-
Jun 2001	Austria Tabak AG	Gallaher Group plc	$1.9B	-	7.4x	-
	Mean			-	12.5x	-
	Median			-	13.0x	-

Advisor: Lazard

EV/LTM EBITDA selected range: 12.0x - 15.0x

19 comps


Jun 2015	TDR	BAT	$603M	-	12.5x	-
Feb 2015	Souza Cruz (24.7%)	BAT	$13.7B	-	15.1x	-
Jul 2014	RAI	Imperial Brands	$7.1B	-	8.8x	-
Jul 2014	Lorillard	RAI	$27.4B	-	13.1x	-
May 2012	Gryson	Japan Tobacco Inc.	$598M	-	12.3x	-
Jul 2011	Haggar Cigarette & Tobacco Factory	Japan Tobacco Inc.	$450M	-	9.9x	-
May 2011	Protabaco	BAT	$452M	-	11.3x	-
Jun 2009	PT Bentoel Internasional Investama	BAT	$744M	-	14.0x	-
Sep 2008	UST	Altria Group	$11.7B	-	12.2x	-
Jul 2008	Rothmans	Philip Morris International	$2.0B	-	9.6x	-
Feb 2008	Tekel (Cigarette business)	BAT	$1.7B	-	11.4x	-
Feb 2008	Skandinavisk Tobakskompagni	BAT	$4.1B	-	11.2x	-
Nov 2007	John Middleton	Altria Group	$2.9B	-	15.7x	-
Jul 2007	Altadis	Imperial Brands	$22.4B	-	14.2x	-
Feb 2007	Commonwealth Brands	Imperial Brands	$1.9B	-	10.9x	-
Jan 2007	Larkson Tobacco	Philip Morris International	$675M	-	14.6x	-
Dec 2006	Gallaher Group	Japan Tobacco Inc.	$19.0B	-	12.8x	-
Apr 2006	Conwood Company	RAI	$3.5B	-	13.5x	-
Mar 2005	PT HM Sampoerna	Philip Morris International	$5.1B	-	14.0x	-
	Mean			-	12.5x	-
	Median			-	12.5x	-

DCF Assumptions

Discount rate and terminal value assumptions the advisor selected for its discounted cash flow analysis.

Goldman Sachs

Open

WACC: 5.0% – 6.5%
Terminal method: Perpetuity growth
Terminal assumption: -0.5% – 0.5%
Forecast basis: RAI Forecasts
Forecast period: fiscal years ending December 31, 2017 through December 31, 2021

JPMorgan

Open

WACC: 5.75% – 6.75%
Terminal method: Perpetuity growth
Terminal assumption: 0.0% – 1.0%
Forecast basis: RAI projections
Forecast period: calendar year 2017 through the end of 2021

JPMorgan

Open

WACC: 6.75% – 8.0%
Terminal method: Perpetuity growth
Terminal assumption: 0.0% – 1.0%
Forecast basis: RAI projections for BAT
Forecast period: calendar year 2017 through end of 2021

Lazard

Open

WACC: 5.0% – 6.0%
Terminal method: Both
Terminal assumption: Exit multiple 9.7x – 14.1x (Implied exit EBITDA multiples (RAI, derived from perpetuity growth rate range)); Perpetuity growth -0.5% – 0.5%
Forecast basis: Management Forecasts (unlevered, after-tax free cash flows for RAI and BAT on a stand-alo… more
Management Forecasts (unlevered, after-tax free cash flows for RAI and BAT on a stand-alone basis)
Forecast period: calendar years 2017 to 2021

Advisor	WACC	Terminal method	Terminal assumption	Forecast basis	Forecast period	Filing
Goldman Sachs	5.0% – 6.5%	Perpetuity growth	-0.5% – 0.5%	RAI Forecasts	fiscal years ending December 31, 2017 through December 31, 2021	Open
JPMorgan	5.75% – 6.75%	Perpetuity growth	0.0% – 1.0%	RAI projections	calendar year 2017 through the end of 2021	Open
JPMorgan	6.75% – 8.0%	Perpetuity growth	0.0% – 1.0%	RAI projections for BAT	calendar year 2017 through end of 2021	Open
Lazard	5.0% – 6.0%	Both	Exit multiple 9.7x – 14.1x (Implied exit EBITDA multiples (RAI, derived from perpetuity growth rate range)); Perpetuity growth -0.5% – 0.5%	Management Forecasts (unlevered, after-tax free cash flows for RAI and BAT on a stand-alo… more Management Forecasts (unlevered, after-tax free cash flows for RAI and BAT on a stand-alone basis)	calendar years 2017 to 2021	Open

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