LONDON (Reuters) - Leading British investor Neil Woodford’s fund firm said on Thursday it backed a takeover of Reynolds American RAI.N by British American Tobacco (BATS.L), calling the tie-up “inevitable”.
The firm’s 9.4 billion pound ($11.71 billion) Equity Income Fund, which faced a “challenging October”, used a spike in Reynolds’ share price to sell out of that firm and reinvested some of the proceeds in its position in BAT.
“Our view is that this deal was inevitable and, although it has happened earlier than we thought, makes a lot of strategic and financial sense. We will be voting in favor of the transaction,” the fund said in an update on the firm’s website.
The fund was the 7th biggest investor in BAT at the end of July, Thomson Reuters data showed. At the end of October, it had 6.25 percent of its assets invested in the company, Woodford said.
Woodford’s view on the deal echoes that of Citi analysts which saw the Reynolds’ rejection as a formality and expected the firms to agree on terms next month.
Also in October, Woodford said the fund had sold its position in Swiss pharmaceutical firm Roche (ROG.S), to use the money to increase its investments in other companies including Capita (CPI.L) and Paypoint (PAYP.L).
At the end of September, Woodford had been the 30th biggest investor in Roche, Thomson Reuters data showed.
The fund lost 1.44 percent in October, the firm said on its website, but remained up 2.4 percent in the year-to-date, with its largest positions in GlaxoSmithKline (GSK.L) and Imperial Brands (IMB.L).
Reporting by Simon Jessop, editing by Vikram Subhedar