RJ Reynolds, the US cigarette maker giant, is checking out a bid for competing cigarette manufacturer Lorillard, trembling up the entire world cigarette market during a period when it is being changed by decreasing smoking rates and the increase of electronic cigarettes.
Over 80 % of Lorillard's sales are derived from the Newport brand, which have bucked a continuous decrease in U.SS smoking rates. The larger American cigarette market, with annually sales of around $90 billion, has been reducing at around 3 % per year.
Lorillard, whose other brands include such cigarettes as Maverick, Old Gold and Kent, owns a market value of around $18.7 billion and was the first one to enter the e-cigarettes, acquiring the Blu brand in 2012 for $135 million.
Experts estimate e-cigarette sales got to about $2 billion in the previous, three times 2012's figure, but without any federal restrictions regulating the only growing market yet, the e-cigarette industry deals with a mishmash of disagreeing local guidelines.
Set up in New York in 1760, Lorillard operated 11.7 % of the North American cigarette market in 2012, as was reported by Euromonitor, in comparison to RJR's 25 % and Altria's 41.5 %.
The precise price of an RJR bid could not be disclosed, however any deal would be most likely to worth the company at more than $20 billion, people acquainted with the issue added. It is unknown if RJR, which manufacturers such cigarette brands as Camel, Pall Mall and Kool, is considering to bid for all of Lorillard, or at least some part of it.
If it takes place, the deal would be the major in the cigarette industry for numerous years. It would also view British American Tobacco (BAT) undertaking a key role, as the UK group which has a much smaller U.S. market share, possesses 42 % of Reynolds.
BAT acquired its stake in RJR practically ten years ago. An inactive commitment stopping an aggressive takeover by the UK group is approaching to an end in July.
Lorillard shares boosted by 4.5 % to $51.27 in New York trading. Bonnie Herzog, an expert with Wells Fargo Securities, stated a "reasonable" price for RJR to offer up might be bigger than $60. The collaboration would produce a more powerful rival to Altria, the tobacco industry leader, she stated, and might experience considerable cost benefits and synergies. Even so, she brought up questions at exactly how RJR would fund such a step, stating it could be organized rather as merger, or BAT could assist finance a takeover