Shareholders approve Reynolds' $27.4 billion acquisition of Lorillard
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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.
Imperial has agreed to purchase the KOOL, Salem, Winston, Maverick and blu eCigs.
Following the transaction, RAI 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.
RAI also announced today 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. RAI 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, position it for long-term success in traditional tobacco products and the growing e-cigarette category, and elevate it to the status of a major U.S. competitor for the first time. As part of the divestiture, Imperial will acquire certain assets owned by Lorillard including its manufacturing and R&D facilities in Greensboro, N.C., and approximately 2,900 employees, including a national sales force.
The closing of the sale of these assets to Imperial is conditioned upon, among other things, RAI’s completion of the acquisition of Lorillard. BAT, RAI’s largest shareholder, has reiterated its strong confidence in the prospects of RAI and is fully supportive of, and has agreed to vote its shares in favor of, the transaction.
As part of the transaction, BAT will maintain its 42 percent ownership in RAI through an investment of approximately $4.7 billion (based on RAI’s closing share price of $60.16 as of July 2, 2014, the same share price used to determine the stock component of Lorillard shareholders’ consideration). ■