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Japanese Tobacco Giant In Talks For Reynolds Assets

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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