British American Tobacco to Buy Rothmans

British American Tobacco said it has agreed to buy Rothmans International for $7.5 billion in stock, a deal that would combine the world’s second- and fourth-largest cigarette companies into a giant to challenge leader Philip Morris Cos. The combination of BAT and Rothmans, which together sell more than 900 billion cigarettes a year, would form a tobacco powerhouse with a 16% market share and leading positions in Latin America, Africa and Asia. BAT’s major brands include Lucky Strike, Kent, Benson & Hedges and Players. Rothmans makes Dunhill, Rothmans and other brands. New York-based Philip Morris, which sells Marlboro and Virginia Slims, is the world’s largest tobacco company, with a 17% market share. BAT would be twice the size of third-ranked R.J. Reynolds, a unit of RJR Nabisco Holdings Corp., whose main brands are Camel, Winston, Salem and Vantage. Rothmans is two-thirds-owned by Swiss luxury goods maker Financiere Richemont and one-third by South African investment group Rembrandt, which are both controlled by the Rupert family of South Africa. BAT’s American depositary receipts rose $2.69 to close at $20.63 on the American Stock Exchange.