Changes in the Group

12 Months Ended

Dec. 31, 2024

Disclosure of detailed information about business combination [abstract]

Changes in the Group

27 Changes in the Group

The Group acquired certain businesses and other assets as noted

below. The financial impact of these transactions to the Group

were immaterial individually and in aggregate. Except as noted,

there were no material differences between the fair value and book

values of net assets acquired in business combinations.

(a) Acquisitions

Beni Oral Nicotine LLC

On 15 July 2024, the Group acquired Beni Oral Nicotine LLC, a U.S.

company owning rights to a portfolio of tobacco-free oral use

synthetic nicotine pouches, for upfront consideration of

US$30 million (£23 million), and deferred payments of contingent

consideration of up to US$200 million (£160 million) deferred for

5 years, subject to the achievement of certain milestones. The

transaction has been accounted for as an asset acquisition, rather

than as a business combination, as the intellectual property

acquired does not represent an integrated set of activities required

by IFRS for business combination accounting. Consequently, the

best estimate of consideration payable has been allocated to the

acquired assets by relative fair value.

(b) Associated undertakings

(i) ITC Limited

On 13 March 2024, the Group announced the divestment of 12%

of its equity stake in ITC Limited (the equivalent of 3.5% of ITC's

ordinary shares) to institutional investors by way of an accelerated

bookbuild process (Block Trade). The Block Trade sale generated

net proceeds after transaction costs and taxes of INR166.9 billion

(£1.6 billion) which were then repatriated to the UK in a series of

foreign exchange transactions in the days following the sale. The

transaction was subject to applicable tax laws in India and the UK,

and proceeds were remitted net of withheld Indian Capital Gains

Tax of INR5.7 billion (£54 million). Following completion of the

transaction, BAT has remained a significant shareholder of ITC,

with a 25.45% holding, and has continued to account for ITC as an

associated undertaking using the equity method of accounting.

On 24 July 2023, ITC announced a proposed demerger of its

‘Hotels Business’ under a scheme of arrangement by which 60%

of the newly incorporated entity would be held directly by ITC's

shareholders proportionate to their shareholding in ITC. In January

2025, ITC Hotels Limited was listed and commenced trading on the

National Stock Exchange of India (NSE) and Bombay Stock Exchange

(BSE). The Group's direct stake in ITC Hotels Limited is 15%.

(ii) Organigram Holdings Inc

On 11 March 2021, the Group announced a strategic collaboration

agreement with Organigram Inc., a wholly owned subsidiary of

publicly traded Organigram Holdings Inc. (collectively,

Organigram). Under the terms of the transaction, a Group

subsidiary acquired a 19.9% equity stake in Organigram Holdings

Inc. to become the largest shareholder, with the ability to appoint

two directors and representation on its investment committee.

The Group accounts for the investment as an associate.

As a result of certain acquisitions made by Organigram during

2021, the Group’s shareholding was reduced to 18.8%. In 2022, the

Group exercised its top-up rights and invested a further £4 million

to maintain its ownership stake.

In 2023, the Group announced the signing of an agreement for a

further investment of CAD$125 million (£74 million) in Organigram,

subject to customary conditions, including necessary approvals by

the shareholders of Organigram, which was given on 18 January

2024. On 24 January 2024, BAT made the first tranche investment

of CAD$42 million (£24 million) acquiring a further 12,893,175

common shares of Organigram at a price of CAD$3.22 per share.

On 30 August 2024, BAT made the second tranche investment of

CAD$42 million (£24 million) acquiring a further 4,429,740

common shares and 8,463,435 preferred shares of Organigram at

a price of CAD$3.22 per share. Subject to certain conditions, the

final 12,893,175 shares subscribed for shall be issued at the same

price as the previous two tranches by the end of February 2025.

The additional investment in 2024 increased the Group's interest

in Organigram at that time to 35.09%. Under the terms of the

agreement, the Group’s voting rights are restricted

to 30%.

Part of the proceeds from the Group’s reinvestment have been

earmarked for “Jupiter”, a strategic investment pool designed to

expand Organigram’s geographic footprint and capitalise on

emerging growth opportunities. During the year, Organigram has

made certain investments, largely in the form of convertible loan

notes, into Sanity Group GmbH and Steady State LLC, both of

which are associated undertakings of the Group.

On 6 December 2024, Organigram announced the 100% acquisition

of Motif Labs Ltd. and the consideration included CAD$40 million

of Organigram common shares. As a result, the Group's interest

in Organigram reduced to c.30.6%.

(iii) Other investments

In April 2023, the Group announced a strategic joint venture

agreement between a Group subsidiary, AJNA BioSciences PBC,

and Charlotte’s Web. Under the terms of the transaction, a Group

subsidiary acquired a 19.9% stake in the new entity, DeFloria LLC,

at a cost of £8 million (US$10 million). During 2024, the Group

made a further investment of £4 million in the form of a convertible

loan note.

In 2022, the Group announced a £32 million investment in exchange

for 16% of Sanity Group GmbH (Sanity Group) which the Group

accounts for as an associate. In addition, during 2022, the Group

made an investment in Steady State LLC (trading as Open Book

Extracts) for £4 million, followed by a second investment of

£4 million in May 2023. The Group accounts for the investment

as an associate. A further investment of £8 million was made in

October 2023 by way of a convertible loan note, which is currently

accounted for as an investment at fair value through profit and loss.

In 2022, the Group announced that it had invested in Charlotte’s

Web, via a convertible debenture of £48 million. The debenture is

convertible at the Group's discretion into a non-controlling equity

stake in Charlotte’s Web of approximately 19.9%. The investment

is recognised at fair value through profit and loss with fair value

changes in the investment recognised in net finance costs. On

conversion of the loan note, the Group will equity account for

its investment.

(c) Non-controlling interests

During 2023, the Group acquired a further 1.31% in Hrvatski

Duhani d.d., at a cost of less than £1 million, following the

acquisitions in 2022 (3.3% at a cost of £1 million).

(d) Assets held for sale and business disposals

(i) BAT Russia and BAT Belarus

On 11 March 2022, the Group announced the intention to transfer

its Russian business in full compliance with international and local

laws. At that time, the Group had two subsidiaries in Russia (BAT

Russia), being JSC British American Tobacco-SPb and JSC

International Tobacco Marketing Services. In September 2023,

the Group formally entered into an agreement to sell the Group's

Russian and Belarusian businesses to a consortium led by then

members of BAT Russia’s Management team, in compliance with

local and international laws. As previously announced, due to

operational dependencies between BAT Russia and the Group’s

subsidiary in Belarus (International Tobacco Marketing Services

BY) (BAT Belarus), the Belarusian business was included in the sale.

The transaction was completed on 13 September 2023 and, since

completion, the buyer consortium has wholly owned both

businesses. These businesses are now known as the ITMS Group.

In accordance with IFRS, the assets and liabilities of the

subsidiaries comprising BAT Russia and BAT Belarus were

classified as held-for-sale as of 31 December 2022 and presented

as such on the balance sheet at an estimated recoverable value.

Impairment charges of £554 million and associated costs of

£58 million were recognised in 2022 as adjusting items. Upon

completion, the businesses were deconsolidated from the Group's

balance sheet. Proceeds of £425 million were received in 2023,

resulting in a partial reversal of £195 million of the previously

recognised impairment. In addition to this, £554 million of foreign

exchange previously recognised in the statement of other

comprehensive income was reclassified to the income statement

upon completion of the transaction. This resulted in a net charge

to the income statement of £353 million which included disposal-

related costs of £3 million and £9 million of foreign exchange gains

on proceeds received. Management concluded that the disposal of

the Russian and Belarusian businesses did not qualify to be

presented as discontinued operations.

As part of the disposal agreements, the Group holds call options

to reacquire the ITMS Group entities. No value has been ascribed

to these options as they cannot be sold or transferred outside the

BAT Group, they expire within two years of the completion of the

transaction, and current sanctions and counter sanctions would

restrict the ability of the Group to exercise these options. In

addition, no value has been ascribed to the options the Group

holds to reacquire certain trademarks and brands utilised by the

ITMS businesses which only expire after 100 years. The likelihood

of exercise of these options within the foreseeable future is

remote, and assuming the higher returns that any market

participant would require given the perceived risk of investing in

Russia going forwards, and a consequent high discount rate, any

value associated with exercising the options would be immaterial.