S hares ofReynolds American ( RAI ) jumped Friday on a report that a big Japanese tobacco firm wants to buy part of the company. Japan Tobacco is in advanced talks to acquire up to $5 billion in assets that could include Reynolds' Natural American Spirit Tobacco brand, according to a Bloomberg report.
Overnight, Japan Tobacco shares rose 4% on the Tokyo exchange. Reynolds' stock rose more than 2%.
Japan Tobacco is trying to expand beyond its borders as the Japanese population and the number of smokers shrink. Company president Mitsuomi Koizumi has said 2015 would be a year of investment.
Technically, Reynolds shares are in good shape. They are just 2% off an all-time high; the stock has moved mostly in a tight range as it builds the right side of a new base. The exception to the tight action was Meltdown Monday, Aug. 24, when the indexes opened dramatically lower.
Reynolds found support at both its 50-day and 200-day moving averages and closed the day near the top of its daily range. Since then, it has been riding comfortably along the north side of the 50-day line.
Reynolds' acquisition of Lorillard in June helped boost Q2 earnings and sales, which were reported July 28. The stock gapped up to a new high that day. The company raised full-year guidance to a range of $1.90 to $2, up from prior guidance of $1.83 to $190.
The merger gives Reynolds control of the leading menthol brand, Newport. It already had control of the fastest-growing menthol brand, Camel.
Its expanded portfolio includes traditional cigarettes, electronic cigarettes, moist smokeless tobacco and other sources of nicotine.
Earlier this month, the company split its stock 2-for-1. It pays a 36-cent-per-share quarterly dividend, which works out to a 3.4% annualized yield.
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