US tobacco giant Reynolds American will buy Lorillard for $27.4 billion and sell cigarette brands including Salem and Winston to British firm Imperial Tobacco for $7.1 billion, the companies said Tuesday. The deal combines Reynolds American Inc (RAI), the parent company of RJ Reynolds, maker of Camel and Pall Mall cigarettes, and Lorillard, whose Newport cigarette is the best-selling menthol brand and the second-best selling cigarette in the US.
The combination of Reynolds American, the second-largest US tobacco company and number-three Lorillard challenges market leader Altria, maker of Marlboro cigarettes. RAI also announced that British firm Imperial Tobacco will purchase its cigarette brands, including menthol cigarettes Kool and Salem, and Winston, and other assets for $7.1 billion in cash.
"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," RAI said. British American Tobacco, RAI's largest shareholder, backed the deal and will maintain its 42 percent stake through an investment of about $4.7 billion. Under the terms of the cash-and-stock agreement, Lorillard shareholders will receive, for each Lorillard share, $50.50 in cash and 0.2909 of a share in RAI stock at the closing of the transaction.
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