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Reynolds American to buy cigarette rival Lorillard for $27.4 billion

Reynolds American to buy cigarette rival Lorillard for $27.4 billion

Posted by Liliana Castaño on July 15, 2014

Cigarette giant Reynolds American Inc. agreed to purchase rival Lorillard Inc. for $27.4 billion, gobbling up additional market share as Americans smoke less.

The deal, announced Tuesday, combines the second- and third-largest American tobacco companies, creating a cigarette behemoth with a projected $11-billion-plus in annual revenue.  The cash, stock and debt transaction is likely to face scrutiny from regulators, analysts said.

The United Kingdom’s Imperial Tobacco Group is also buying Reynolds’ Kool, Salem, Winston, Maverick and blue eCigs brands, along with other assets, for $7.1 billion. And British American Tobacco will invest $4.7 billion in the Reynolds-Lorillard deal to maintain its 42% stake in Reynolds.

If the deal closes, the combination of Reynolds, of Winston-Salem, N.C., and Lorillard, of Greensboro, N.C., would be a strong challenger to Altria, the nation's largest tobacco products maker and parent of Philip Morris.

Reynolds, the nation's second-largest tobacco firm, adds Lorillard's Newport brand to its lineup of Camel and Pall Mall cigarettes. Newport is the nation’s most popular menthol cigarette.

“The addition of Newport … will enhance our ability to compete in the combustible cigarette and smokeless categories,” Reynolds Chief Executive Susan Cameron said in a statement.

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