Reynolds American Inc. RAI recently announced the proposed leadership roles and responsibilities to be assumed after being acquired by British American Tobacco p.l.c. (BAT). The buyout, announced in Jan 2017, is anticipated to close in the third quarter of 2017 and is subject to the shareholders’ approval as well as customary closing conditions.

We note that Debra A. Crew will continue as the president and CEO of Reynolds American and will report to the president and CEO of British American after this acquisition is completed. The existing executive vice president and chief financial officer of Reynolds American, Andrew D. Gilchrist is expected to resign soon after the deal is closed. However, the name of Gilchrist’s successor has not been revealed yet.

In addition, the present executive vice president of consumer marketing for RJR Tobacco segment, Cressida Lozano is likely to resign later this year. Also, the existing executive vice president of public affairs and chief communications officer, J. Brice O'Brien will be resigning soon post acquisition. His successor will be the current Reynolds American’s general counsel, Mark Holton, who is expected to assume both responsibilities after completion of the buyout. Notably, majority of Reynolds American and its subsidiaries' senior executives along with other leaders shall continue to carry on with their responsibilities.

In fact, the association between Reynolds and BAT dates back to 2004. On Jul 30, 2004 the U.S. assets, liabilities, and operations of Brown & Williamson Holdings (or B&W), a wholly owned subsidiary of BAT was combined with R.J. Reynolds Tobacco Company, a wholly owned subsidiary of Reynolds American. Consequently, Brown & Williamson became the owner of approximately 42% of Reynolds American’s outstanding common stock.

Again, on Dec 1, 2015, Reynolds American's subsidiary, R.J. Reynolds Tobacco Company, and Nicoventures Holdings Limited, a BAT subsidiary entered into a multi-year vapor technology-sharing and licensing agreement, to share their technological know-how and develop next-generation vapor products.

Recently, Reynolds American posted lower-than-expected first-quarter 2017 results, wherein both its top and bottom lines missed the Zacks Consensus Estimate but increased on a year-over-year basis. (See more: Reynolds American Q1 Earnings, Sales Lag Estimates). In fact, its sales have lagged our estimate in six of the past eight quarters. Additionally, the company is facing many challenges in the tobacco industry, which is hampering its performance.

A glance at Reynolds American’s share price movement over the last one month shows that it has underperformed the Zacks categorized Tobacco industry. This Zacks Rank #4 (Sell) stock rallied 3.6% compared with the industry’s gain of 6.4%.

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Following the acquisition by BAT we believe Reynolds American to achieve its missions successfully besides efficiently catering to the needs of its customers.

Stocks that Warrant a Look

Better-ranked stocks in the broader Consumer Staples sector include Ollie's Bargain Outlet Holdings, Inc. OLLI, Energizer Holdings, Inc. ENR and Tupperware Brands Corporation TUP carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ollie's Bargain, with a long-term earnings growth rate of 17.1% has surged 56.8% in the last one year.

Energizer Holdings, with a long-term earnings growth rate of 9.8% has posted an average beat of 21.6% in the last four quarters.

Tupperware Brands, with a long-term earnings growth rate of 12% has posted an average beat of 6.6% in the last four quarters.

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