Reynolds American and Lorillard to become 2nd largest tobacco group through merger

<p>US tobacco companies Reynolds American and Lorillard are in the final stages of agreeing a merger.</p>

US tobacco companies Reynolds American and Lorillard are in the final stages of agreeing a merger, in a bid to become the second biggest group in the industry, behind Altria Group.

British American Tobacco Plc (BATS), the UK company which owns 42 per cent of Reynolds, said it expects to support the transaction by subscribing for additional shares to maintain its stake.

Imperial has also confirmed it was “in discussions with Reynolds and Lorillard to evaluate a possible acquisition of certain assets and brands owned by Reynolds and Lorillard”, the Financial Times report.

Analysts estimate Imperial could increase its share of the $100 billion (£58.4 billion) US tobacco industry to around ten per cent by acquiring brands cast off by Reynolds and Lorillard.

However, "the assets likely to be on offer don't feel hugely attractive," said Martin Deboo, an analyst at Jefferies, quoted by the Wall Street journal.

Reynolds’ brands include Camel, Kool and Pall Mall, while Lorillard’s brands include Maverick, Old Gold and Kent, as well as the Newport brand of menthol cigarettes.

In terms of market share, Reynolds American and Lorillard are second to Altria, which accounts for about half of the US cigarette market through its Philip Morris USA division.

Together, Reynolds and Lorillard have a market value of about $56 billion and annual sales of more than $13 billion, according to data compiled by Bloomberg.

A deal between Reynolds and Lorillard would reshape the US tobacco landscape.

Lorillard rose 4.9 per cent to $66.20 at 08:12 ET today (July 11th) in New York before the market opened, while Reynolds advanced two per cent to $63.50. 

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