RJR and B&W US Combination

British American Tobacco PLC
27 October 2003

         R. J. Reynolds and Brown & Williamson to Combine US Businesses

•  Agreements signed to combine R. J. Reynolds with the US tobacco business of 
   Brown & Williamson ("B&W"), under a new public holding company, Reynolds
   American Inc., which will apply to be listed on the New York Stock Exchange

•  British American Tobacco and the current shareholders of R. J. Reynolds will 
   receive 42 per cent and 58 per cent, respectively, of the common equity in
   Reynolds American

•  Reynolds American will acquire Lane, British American Tobacco's US smoking 
   tobacco and cigar business, for $400 million in cash

•  Creates a combined business with an enlarged brand portfolio able to compete 
   more effectively in the challenging US operating environment

•  Generates enhancement to earnings per share of R. J. Reynolds and British 
   American Tobacco, through expected annual synergies of over $500 million

•  Increases British American Tobacco's cash flow in the first full year
   following completion, taking into account a commitment from the management of
   Reynolds American to recommend a dividend payout of 75 per cent of net income

•  B&W to transfer to Reynolds American all Master Settlement Agreement
   liabilities and the corresponding cash balance, which averages $750 million 
   over the course of the year

•  B&W to be indemnified for all existing and any future litigation relating to 
   its US business

•  Andrew Schindler, currently Chairman and CEO of R. J. Reynolds, to become 
   Chairman of Reynolds American.  Susan Ivey, currently CEO of B&W, to
   become CEO of Reynolds American.  British American Tobacco to appoint five of
   the remaining 11 Directors of Reynolds American

•  British American Tobacco has agreed not to increase its shareholding in
   Reynolds American above 42 per cent for 10 years following completion of the
   transaction and has agreed to normal restrictions on the timing and quantum 
   of any sale of Reynolds American shares

•  Through this combination, British American Tobacco remains firmly committed 
   to the US market

Commenting on the proposed transaction, Andrew Schindler, Chairman and CEO of R.
J. Reynolds, said: "This agreement marks a milestone for both companies.  The
combination of these companies will enable us to achieve tremendous
efficiencies, and will greatly enhance our ability to compete effectively in the
US market.  The combination is expected to be accretive to earnings and provide
outstanding value and return to shareholders.  R. J. Reynolds and British
American Tobacco recognise the mutual benefits of this combination and share a
strong desire to complete the deal."

                                                    Cont/d

Martin Broughton, Chairman of British American Tobacco, said:  "This exciting
combination makes both strategic and financial sense.  This merger will improve
our competitive position in the most important cigarette market in the world.
It gives the Group a 42 per cent share in a stronger and more sustainable
business with an enhanced brand portfolio. We believe that the merger is the
best way to achieve our long-term strategic ambitions in the US market, while
improving both our earnings per share and our cash flow in the first full year
following completion."

Enquiries

British American Tobacco
Ralph Edmondson, Head of Investor Relations                     [phone]
David Betteridge, Press Relations Manager                       [phone]

Goldman, Sachs & Co.
James Del Favero                                                [phone]
Joseph Gatto                                                    [phone]

Goldman Sachs International
Karen Cook                                                      [phone]
Nick Reid                                                       [phone]

Lazard
Nicholas Jones                                                  [phone]
Sarah Hedger                                                    [phone]

Cazenove & Co.
David Mayhew                                                    [phone]
Christopher Smith                                               [phone]

Credit Suisse First Boston (Europe Ltd)
Charles Kirwan-Taylor                                           [phone]
Richard Crawley                                                 [phone]

There will be a joint analyst, investor and media presentation in London at 9.30
am GMT (4.30 am EST) on Tuesday 28 October 2003 at British American Tobacco,
Globe House, 4 Temple Place, London, WC2R 2PG with a web-casting facility
(listen only) on British American Tobacco's website (www.bat.com).  There will
also be a dial-in conference call facility (listen only) for the 9.30 am GMT
(4.30 am EST) presentation; dial-in details are as follows:

UK:                020 7081 9339 (password: BAT)
US/International:  [phone] (password: BAT)

A playback facility for this presentation will be available from 1.00 pm GMT
onwards for 48 hours on Tel: [phone] (pass code: 720 106).

A US dial-in conference call will take place at 13.30 pm GMT (8.30 am EST);
dial-in details are as follows:

US:                 800 362 0574 (password: BAT)
UK/International:   Dial in via the International Operator, on the same number

A playback facility for this presentation will be available until 1 November
2003 on Tel: [phone].

A recording of both presentations will be accessible through www.bat.com.

An interview with Martin Broughton, Chairman of British American Tobacco, is
available in video, audio and text on www.bat.com or www.cantos.com.

British American Tobacco's quarterly results for the nine months to 30 September
2003 will also be presented at the joint analyst, investor and media
presentation.


27 October 2003

         R. J. Reynolds and Brown & Williamson to Combine US Businesses

Overview

R. J. Reynolds Tobacco Holdings, Inc. ("R. J. Reynolds") and British American
Tobacco p.l.c. ("British American Tobacco" or, with its affiliates, the "Group")
announce that definitive terms have been agreed to combine R. J. Reynolds with
the US assets and liabilities of Brown & Williamson Tobacco Corporation ("B&W's
US Business" and "B&W", respectively), British American Tobacco's 100 per cent
owned subsidiary (the "Combination").

Under the terms of the Combination, R. J. Reynolds and B&W's US Business will be
combined under a new public holding company, Reynolds American Inc. ("Reynolds
American").   R. J. Reynolds' existing shareholders will receive 58 per cent of
the common stock of Reynolds American, with British American Tobacco receiving
42 per cent, valuing B&W's US Business at approximately $2.6 billion on the
basis of R. J. Reynolds' current market capitalisation of approximately $3.6
billion.  In addition, the Group will sell Lane, its US smoking tobacco and
cigars business, to Reynolds American, for $400 million in cash (together with
the Combination, the "Transactions").  The Transactions are expected to be tax
free to the Group and to R. J. Reynolds' shareholders.

Completion of the Transactions is conditional upon receiving anti-trust
clearance, approval from R. J. Reynolds' shareholders and satisfactory Internal
Revenue Service rulings.

Reasons for the Transactions

The combination of R. J. Reynolds and B&W's US Business will consolidate the
second and third largest US tobacco companies.  It will create a business with a
combined market share in excess of 30 per cent in the US, the world's most
profitable cigarette market.  The Boards of R. J. Reynolds and British American
Tobacco believe that the scale of this enlarged business and its combined
management strength create a platform from which to compete more effectively in
the challenging US operating environment.  The combined brand portfolio will
include Camel, Doral, GPC, Kool, Misty, Pall Mall, Salem and Winston.  It is
planned that Reynolds American's headquarters and operations will be
consolidated in Winston-Salem, North Carolina.

In 2002, the enlarged group would have had combined sales of approximately $10
billion and US volumes of approximately 135 billion cigarettes.

The combined businesses are expected to generate annual cost synergies of over
$500 million, which should be fully realised within 18-24 months of closing,
principally from sales, distribution, administration and manufacturing.  These
savings are incremental to those recently announced by R. J. Reynolds in its
restructuring plan.

Management and Governance of the Enlarged Group

Andrew Schindler, currently Chairman and CEO of R. J. Reynolds, will become
Executive Chairman of Reynolds American for a six month period after closing and
will then serve as Non-Executive Chairman.  Susan Ivey, currently President and
CEO of B&W, will become President and CEO.  The Board will comprise 13 Directors
including the Chairman and the CEO. Under the terms of the governance
arrangements, the Group will designate for nomination 5 of the remaining 11
directors and will ensure that at least 3 of its nominated Directors are
independent.

Structure of the Combination

The Combination will be effected through the creation of a new holding company,
Reynolds American, which will apply to be listed on the New York Stock Exchange.
B&W's US Business will be combined with R. J. Reynolds Tobacco, a subsidiary of
R. J. Reynolds.


Through B&W, the Group will receive Reynolds American shares representing 42 per
cent of Reynolds American's fully diluted share capital at the time of closing,
as consideration for B&W's US Business.  R. J. Reynolds' existing shareholders
and optionholders will receive shares and options in Reynolds American
representing 58 per cent of Reynolds American's fully diluted share capital at
the time of closing.

In addition, the Group will receive $400 million in cash in consideration for
the sale of Lane, which will be used to reduce net indebtedness and for general
corporate purposes.  Lane will be a separate subsidiary of Reynolds American, as
will Santa Fe Natural Tobacco Company, Inc.

British American Tobacco will enter into a standstill agreement with Reynolds
American, which will prevent the Group from increasing its shareholding in
Reynolds American above 42 per cent for 10 years following completion of the
Combination and the Group will be restricted in its ability to sell shares,
reflecting the long-term nature of its investment.

R. J. Reynolds Tobacco will indemnify B&W for all existing and any future
litigation relating to the US tobacco business.  Reynolds American's rights to
the Group's international brands will be restricted to the US market but
Reynolds American will enter into a five year contract manufacturing arrangement
for the supply of the Group's international brands to Japan and various other
markets.

Financial Effects of the Combination

B&W has recently faced increased competition and the outlook for the next two to
three years continues to be uncertain and challenging.  The Transactions are
expected to be at least 4 per cent enhancing to British American Tobacco's
earnings per share in the first full year following completion, with increased
positive contributions thereafter.

The management of R. J. Reynolds is currently committed to a dividend of US$3.80
per share. The designated management of Reynolds American has committed to
recommend to the Board of Reynolds American a dividend of 75 per cent of its net
income.  Consequently, British American Tobacco expects that by 2005 the
dividends received from Reynolds American will exceed the net cash flow that B&
W's US Business would have contributed to the Group as a stand-alone business.
The Group's 42 per cent shareholding is likely to preclude substantial share
repurchase programmes by Reynolds American.

British American Tobacco's consolidated cash balances have historically included
cash that is held to meet payments under the Master Settlement Agreement ("MSA
"). At closing, B&W will be transferring all MSA liabilities and the
corresponding cash balance associated with them to Reynolds American.  The cash
balance fluctuates during the year, but averages approximately $750 million.
The Group will receive $400 million cash consideration for the sale of Lane.

British American Tobacco will equity account for its investment in Reynolds
American as an associate.

Timetable

The Transactions are conditional upon obtaining anti-trust clearance, the
appropriate rulings from the Internal Revenue Service and the approval of R. J.
Reynolds' shareholders.  R. J. Reynolds and B&W have agreed appropriate
contractual commitments to complete the Transactions and it is expected that
this should be achieved by mid-2004.  The Transactions are inter-conditional and
will complete simultaneously.

Notes

•   British American Tobacco is the world's most international tobacco group
    and the second largest stock market-listed tobacco group by global market 
    share.  It currently has some 85 factories in 66 countries and in 2002 sold 
    777 billion cigarettes.  Including associated companies, the Group employs 
    more than 85,000 people world-wide.  Its headquarters are in London.

•   The Group has a global market share of almost 15 per cent and more than
    300 brands including international brands such as Lucky Strike, Kent, 
    Dunhill and Pall Mall.

•   B&W is the third largest cigarette manufacturer and marketer in the US.
    It is a 100 per cent subsidiary of British American Tobacco.  As at 
    31 December 2002, B&W's US Business had net assets, on the basis of UK GAAP, 
    of $631 million.  In the twelve months to 31 December 2002, B&W's US 
    Business generated profits before interest and taxation, on the basis of UK 
    GAAP, of $598 million ($325 million in the nine months to 30 September 2003, 
    before non-recurring items).

•   Lane manufactures several smoking tobacco, cigar, and pipe tobacco brands.  
    It is a 100 per cent subsidiary of British American Tobacco.  As at 31
    December 2002, Lane had net assets, on the basis of UK GAAP, of $45 million. 
    In the twelve months to 31 December 2002, Lane generated profits before 
    interest and taxation, on the basis of UK GAAP, of $39 million ($27 million 
    in the nine months to 30 September 2003).

•   R. J. Reynolds is the parent company of R. J. Reynolds Tobacco Company
    and Santa Fe Natural Tobacco Company, Inc.  R. J. Reynolds Tobacco Company,
    which is the second-largest tobacco company in the United States, has a 
    product line which includes Camel, Doral, Salem and Winston.  Santa Fe 
    Natural Tobacco Company, Inc. manufactures Natural American Spirit 
    cigarettes and other tobacco products, and markets them both in the US and 
    internationally.  As at 31 December 2002, R. J. Reynolds had net assets, on 
    the basis of US GAAP, of $6,716 million.  In the twelve months to 31 
    December 2002, R. J. Reynolds generated profits before taxation, on the 
    basis of US GAAP, of $683 million, after deducting $224 million of 
    restructuring and asset impairment charges.

This press release, which has been prepared by and is the sole responsibility of
British American Tobacco, has been issued by British American Tobacco and has
been approved by Goldman Sachs International, Lazard and Cazenove & Co. solely
for the purposes of section 21 (2)(b) of the Financial Services and Markets Act
2000.

Goldman Sachs International, Lazard and Cazenove & Co. which are regulated in
the UK by the Financial Services Authority, are acting exclusively for British
American Tobacco in connection with the Transactions and will not be responsible
to anyone other than British American Tobacco for providing the protections
afforded to customers of Goldman Sachs International, Lazard and Cazenove & Co.
nor for providing advice in relation to the Transactions.

Some of the statements herein are forward-looking within the meaning of the
Private Securities Litigation Reform Act of 1995, including any statements about
satisfying the closing conditions to the proposed transaction.  Such
forward-looking statements are inherently subject to known and unknown risks,
uncertainties and other facts that may cause actual results, performance or
achievements of British American Tobacco and its affiliates to be materially
different from those expected or anticipated in the forward-looking statements.
Any such forward-looking statements are based upon British American Tobacco's
current expectations and assumptions, which may be affected by a number of
factors, including those discussed above.  The following factors are among those
that may cause actual results to materially differ from those expected:  the
approval of the proposed transactions by R. J. Reynolds' shareholders; receipt
and timing of various regulatory approvals; the satisfaction of closing
conditions; the timing of the closing of the proposed transactions; the volume
of products sold by British American Tobacco and the price at which such
products are sold; and government regulations limiting its ability to sell its
products.  British American Tobacco has no responsibility to (and disclaims an
intention to) update the forward-looking statements contained herein to reflect
events or circumstances occurring after the date hereof.

Reynolds American, the holding company to be formed in the proposed transaction,
intends to file a registration statement on Form S-4 that will include a joint
proxy statement/prospectus and other relevant documents in connection with the
proposed transaction.  INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THESE
DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION.  Investors and security holders may
obtain a free copy of the prospectus/proxy statement (when it becomes available)
and other documents filed by R. J. Reynolds and Reynolds American with the SEC
at the SEC's website at www.sec.gov.  Free copies of the prospectus/proxy
statement (when it becomes available), as well as the other documents filed with
the SEC by R. J. Reynolds and Reynolds American, may also be obtained from R. J.
Reynolds by directing a request to R. J. Reynolds at P.O. Box 2866
Winston-Salem, NC 27102-2866, USA or on R. J. Reynolds' website,
www.rjrholdings.com.


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