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Reynolds American to buy Lorillard for $27.4 billion

Staff writer |
Reynolds American will acquire Lorillard in a cash-and- stock transaction currently valued at $68.88 per Lorillard share, or a total of $27.4 billion, including the assumption of net debt.

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Under the terms of the transaction, which has been approved by the boards of directors of both companies, Lorillard shareholders will receive, for each Lorillard share, $50.50 in cash and 0.2909 of a share in RAI stock at closing, representing $68.88 per share based on RAI’s closing share price yesterday.

That represents a premium of 40.4% to the stock price on February 28th, the last trading day prior to initial media speculation around a possible transaction, and a premium of 12.6% to the stock price on July 2nd, prior to more recent news reports.

Following the transaction, Reynolds American is projected to have over $11 billion in revenues and approximately $5 billion in operating income, and its operating companies will have growth pillars across key industry categories: Newport, Camel, Pall Mall and Natural American Spirit in combustible cigarettes; Grizzly in smokeless tobacco; and VUSE in the growing e-cigarette market.

Reynolds American also announced that it has reached an agreement with Imperial, the fourth-largest international tobacco company, under which Imperial has agreed to purchase the KOOL, Salem, Winston, Maverick and blu eCigs brands and other assets and liabilities for a total consideration of $7.1 billion in cash. Reynolds American expects to receive net cash proceeds of approximately $4.4 billion after taxes.

The addition of these brands to Imperial’s U.S. operations will more than triple its share of the U.S. cigarette market.

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