Dec 9, 2023 - Economy
Inside the massive writedown of one of the biggest acquisitions of all time
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When British American Tobacco acquired Reynolds American in 2017, it was — by far — the most valuable brand acquisition of all time, involving brands (Newport, Camel, American Spirit, and more) worth $93.6 billion.
Why it matters: Today, the market capitalization of the entire combined company is just $65 billion.
Driving the news: BAT this week announced it would write down the value of the Reynolds American brands by $31.5 billion, in a move described by CEO Tadeu Marroco as "accounting catching up with reality."
Between the lines: BAT's acquisition of Reynolds was, to put it mildly, not a success.
- Marroco has now conceded that the "combustibles" market — cigarettes — is going to shrink steadily over the next 30 years, and that cigarette brands therefore can't be accounted for as likely to live forever.
- A group of brands that are certain to die can't possibly be worth $80 billion, which is how much BAT valued them at until this week.
