Families reflect on Reynolds/BAT deal Reynolds, Gray descendants offer mixed views of Reynolds American's expected sale to BAT Reynolds, Gray descendants offer mixed views of Reynolds American expected sale

The potential $49.4 billion sale of Reynolds American Inc. to a global tobacco giant has stirred a mixed bag of emotions from descendants of the R.J. Reynolds and Bowman Gray families now that the sale appears likely to happen.

Noah Reynolds, a great-grandson of company founder R.J. Reynolds, has high hopes that BAT will respect Reynolds' role in the local community, particularly in how the company, under Susan Cameron's guidance as top executive, reconnected relationships over the past 13 years that were torn from the Ross Johnson era and leveraged buyout that followed.

Bowman Gray IV, believes a sale to British American Tobacco Plc was destined to happen, given the shrinking U.S. tobacco marketplace and pressures to maintain a high dividend to stockholders. Bowman Gray IV is a local independent stockbroker.

Gray's great-grandfather, Bowman Gray Sr., was the first person to be named as Reynolds' president and chairman who was not a Reynolds family member. Bowman Gray Jr. served as chairman of Reynolds during its heyday as the world's top tobacco manufacturer.

Patrick Reynolds, a grandson of R.J. Reynolds who has become a national anti-tobacco advocate, fears BAT ownership of Reynolds will make his efforts that much hard domestically and globally.

R.J. Reynolds died in 1918, five years after his Camels cigarettes took America by storm in one of the most successful product launches in the history of corporate America.

R.J. Reynolds Tobacco Co., founded in Forsyth County in 1875 as a chewing tobacco manufacturer, served as the lead corporate patriarch for the local community for decades.

However, the company's prowess began to shrink from the combination of lowering U.S. demand for cigarettes since the mid-1980s and the crushing debt weight from a $25.4 billion leveraged buyout in November 1988.

As Reynolds reduced its local workforce from 15,500 in the mid-1980s to about 2,000 currently, it no longer had the need for several downtown Winston-Salem buildings, some of which were donated to Wake Forest University and recycled into life sciences facilities.

"When Ross Johnson moved the headquarters of RJR Nabisco to Atlanta in 1987, he abruptly ripped the fabric of a community that had been woven together slowly for over a century," Noah Reynolds said.

"When Susan Cameron moved to Winston-Salem in 2004 to lead the new Reynolds American, she began a process of not only consolidating and innovating the operations of the company, but also mending and preserving its legacy through supporting the economic re-development of our historic factories and renewing its philanthropic engagement with our charitable institutions."

Cameron resigned from her second stint as chief executive of Reynolds on Jan. 1. She is now executive chairwoman, and will transition into the position of nonexecutive chair on May 1. Noah Reynolds said that Cameron's experience will likely persuade BAT to establish a top civic role in Winston-Salem.

Cameron also previously served as top executive of former BAT subsidiary Brown & Williamson Tobacco Corp.

"Leadership matters, and corporations are citizens in the places within which they reside," Noah Reynolds said.

"I can only hope that if the merger is accepted by Reynolds shareholders, British American Tobacco and its board of directors in London will continue to place a high value on the company's relationship with and support of our local community."

Bowman Gray IV said he is encouraged that BAT - as a current 42.2 percent owner in Reynolds since July 2004 - has recognized and valued Reynolds' current manufacturing strengths and future innovation prowess.

"I am surprised it took this long to happen," Gray said.

"I do not think there should be any concern over job loss. This acquisition by BAT was not so much about cost savings or consolidation, as it is about buying the Reynolds' manufacturing capacity, product line and, in particular, the vapor business."

'Farmaceuticals' are

attractive assets

Another likely attraction to BAT, Gray said, is below-radar subsidiaries such as Kentucky Bioprocessing LLC, which is working on an Ebola vaccination.

"Those are potential growth drivers, as tobacco companies push further into the 'farmaceutical' business." Gray said.

Gray said he believes the potential sale of Reynolds to BAT will be positive overall.

"It is unfortunate that corporate leadership will not be local, but we have been through that before, except this time it will not be because someone is trying to strip the company, but grow it," Gray said.

"We should not lose sight of the fact that it was R.J. Reynolds himself who allowed Buck Duke to buy the company the first time. When he ultimately got his company back after the dissolution of American Tobacco in 1911 and flush with new money, he began to build a world-class company."

Gray said acquisitions have been a part of Reynolds' history, including attempts to diversify its product mix and revenue through buying Chun King, Maersk Sealand and Nabisco, or expand its tobacco industry reach in recent years through buying Conwood Co. and Lorillard Inc.

"There are stories that linger from the 1960s about possible mergers with Coca-Cola and a large pharmaceutical company," Gray said.

"I think there is always a tendency to lament what used to be, but a company that does not change or adapt ultimately dies. I think this buyout sets the stage for the next 100 years of Reynolds, and I look forward to seeing what is to come."

Patrick Reynolds, who lives in California, wrote in 1989 "The Gilded Leaf: Triumph, Tragedy and Tobacco," one part personal insight into the Reynolds family, and one part explanation for his anti-tobacco advocacy.

When asked about the potential BAT ownership, Patrick Reynolds said that "a big monster has been devoured by a bigger monster."

"BAT's takeover of Reynolds does not bode well for the Third World, where Big Tobacco has been peddling their addictive, deadly products for decades, and selling them to the young, poor and uneducated, perhaps the only opportunities for growth that they have left."

"This merger is scary. Isn't causing one billion deaths in this century enough?

"That's what Big Tobacco will do, if present trends continue, according to the World Health Organization in Geneva."

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