World Cup schedule
FOX World Cup scores

Reynolds American to buy Lorillard in $27.4 billion deal

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

WINSTON-SALEM, N.C. — Reynolds American, Inc. confirmed Tuesday morning that they will buy their rival Lorillard, Inc. for $27.4 billion, one of the largest corporate deals in the Triad.

But the purchase details have several twists that analysts and industry observers did not foresee as part of the companies’ concessions for trying to gain U.S. federal regulatory approval, according to the Winston-Salem Journal.

For instance, the role of Imperial Tobacco Group PLC is surprisingly larger than expected, given that it is a rival of British American Tobacco Ltd., which owns 42 percent of Reynolds.

Though Reynolds is buying Lorillard and its top-selling Newport menthol brand, it is not taking with it blu eCigs, the top-selling electronic cigarette in the United States. That will go to Imperial, along with Reynolds’ cigarette brands Kool, Salem and Winston, and Lorillard’s Maverick brand, along with other unnamed assets.

Imperial also would gain Lorillard’s Greensboro manufacturing plant and research and development operations and take over Lorillard’s workforce of 2,900.

That development should hearten Triad economic officials because the deal avoids the likelihood of hundreds of jobs being eliminated if Reynolds was buying Lorillard’s operations.

​"In the long run, I think we're going to be great and I think Reynolds is going to be even stronger. Allows them to move forward with some of their new innovation," said Winston-Salem Mayor Allen Joines.

"We expect to add a significant number of jobs at RJ Reynolds tobacco," said Reynolds Spokesman David Howard. "Our expected needs are going to increase in manufacturing, taking on the Newport brand in the portfolio."

The deal also shows the confidence Reynolds has in its e-cig version, Vuse, which began national distribution in June. Reynolds has committed to establish Vuse production at its Tobaccoville plant and create 200 production jobs.

The combined statement said Imperial would get other assets in which it would pay up to $7.1 billion. Reynolds projects getting $4.4 billion from that end of the deal.

Imperial has between a 3 percent and 4 percent market share in traditional cigarettes with U.S. subsidiary Commonwealth Brands. It is projected by analysts to grow that market share up to 12 percent with the buying of the Reynolds and Lorillard nongrowth brands.

The confirmation comes 4½ months after rumors began swirling about a potential combination that could give it 42 percent of the U.S. cigarette market share.

Reynolds said it is paying $68.88 a share for Lorillard, which breaks down to $50.50 in cash and the equivalance of $18.38 in Reynolds stock. That would make Lorillard shareholders owners of 15 percent of Reynolds stock - about the same as its current market share.

BAT would retain 42 percent ownership in Reynolds.

Susan Cameron, Reynolds’ chief executive and president, would stay in her positions, while Murray Kessler, her counterpart at Lorillard, would join the Reynolds board of directors.

1 Comment

  • Popeye

    I know a lot of people that work at Lorillard are scared because they may close the plant or have a lot of lay-offs. Good Luck people , God Bless you all!!

Comments are closed.