By Dow Jones Business News,
July 15, 2014, 07:41:00 AM EDT
By Michael Calia
Reynolds American Inc. agreed to acquire Lorillard Inc. in a cash-and-stock deal worth about $25 billion, the
companies said Tuesday.
Under the terms, Lorillard shareholders will receive $50.50 in cash and 0.29 Reynolds shares in exchange for each
Lorillard share, a value of $68.88 per share. Including the assumption of debt, the deal is valued at $27.4 billion, the
The deal combines Reynolds' Camel and Pall Mall cigarettes with Lorillard's popular Newport menthol brand to create
a more powerful No. 2 to U.S. industry leader Altria Inc., maker of Marlboro. Reynolds and Lorillard have a combined
stock-market capitalization of more than $50 billion.
Reynolds expects to have more than $11 billion in revenue and about $5 billion in operating income after the deal.
Additionally, Reynolds American said it reached a deal to sell the Kool, Salem, Winston, Maverick and Blu eCigs
brands and other assets to Imperial Tobacco Group PLC for $7.1 billion in cash. Reynolds said it expects to receive $4.4
billion in proceeds after taxes.
Selling the brands is aimed at easing the antitrust scrutiny that the deal may face. In addition, the U.S. Food and
Drug Administration also is weighing a possible crackdown on menthol cigarettes, which fuel more than 80% of Lorillard's
sales, after the agency banned all other cigarette flavors in 2009.
The potential combination comes as tobacco majors try to increase scale and cut costs amid a yearslong decline in
U.S. cigarette consumption, including an estimated 4% contraction last year, even as profits remain robust. Two rare
pockets of growth in the $100 billion U.S. tobacco market are e-cigarettes and menthol cigarettes. Lorillard is the
market leader in both.
Write to Michael Calia at email@example.com
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