Is Reynolds Just Flirting With British American Tobacco? Takeover Rejection Amid Deal Optimism

Reynolds stock lost close to 1 percent on Monday but was trading higher by more than 2.50 percent early Tuesday morning. Part of the rebound could be attributed to an encouraging research report by analysts at Citi.

Rejection Could Be A Coy Ploy

Citi's Adam Spielman commented in a note on Tuesday that Reynolds' rejection is merely a "formality," as Reynolds is looking for a higher price from British American Tobacco.

Spielman continued that this isn't surprising, as it is merely part of the "well-established dance involved in takeovers." The analyst also highlighted a Bloomberg report that suggested British American Tobacco is willing to slightly increase its offer.

"If anything it suggests an agreement might come soon — The rejection comes a little over three weeks after the initial offer (October 21), which is on the faster side of our expectations," Spielman added.