Reynolds American, which played a critical role in the development of Winston-Salem and continues to play a significant economic role there, will acquire Greensboro-based Lorillard, the two tobacco companies announced today.
Press release after the jump:
Reynolds American Inc. ((NYSE: RAI), a leading tobacco products company and the parent company of RJ Reynolds Tobacco Company, and Lorillard Inc. (NYSE: LO), the third largest tobacco company in the the US and maker of Newport cigarettes, today announced that they have entered into a definitive agreement in which RAI has agreed to 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.
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 percent to the stock price on Feb. 28, the last trading day prior to initial media speculation around a possible transaction, and a premium of 12.6 percent to the stock price on July 2, prior to more recent news reports.
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 US operations will more than triple its share of the US 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 US competitor for the first time.