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You are at:»»Reynolds American, Inc. (NYSE:RAI) Agrees To Acquire Lorillard Inc. (NYSE:LO) In $27.4 Billion Cash-And-Stock Deal
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Reynolds American, Inc. (NYSE:RAI) Agrees To Acquire Lorillard Inc. (NYSE:LO) In $27.4 Billion Cash-And-Stock Deal

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Reynolds American, Inc. (NYSE:RAI) the parent company of R.J. Reynolds Tobacco Company, has entered into a definitive agreement to acquire Lorillard Inc. (NYSE:LO), the third largest tobacco company in the US and maker of Newport cigarettes. Reynolds will acquire Lorillard in a cash-and-stock transaction 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. Upon closing, Lorillard shareholders will own approximately 15% of RAI.

Following the transaction, RAI is projected to have over $11 billion in revenues and approximately $5 billion in operating income as well as growth opportunities across industry categories including Newport, Camel, Pall Mall and Natural American Spirit in combustible cigarettes; Grizzly in smokeless tobacco; and VUSE in the e-cigarette market.

RAI has also reached an agreement with Imperial Tobacco Group, under which Imperial has agreed to purchase the KOOL, Salem, Winston, Maverick and blu eCigs brands and other assets and liabilities for $7.1 billion in cash. RAI expects to receive net cash proceeds of approximately $4.4 billion after taxes. As part of the divestiture, Imperial will acquire certain assets owned by Lorillard including its manufacturing and R&D facilities in Greensboro, N.C., and approximately 2,900 employees, including a national sales force.

RAI expects the transaction to be accretive to earnings in the first full year, with strong double-digit accretion in the second year and beyond on a percentage basis. RAI plans to maintain its current dividend policy until the transaction closes and is targeting a dividend payout ratio of 75% going forward. Lorillard will continue its existing dividend policy until the deal closes. RAI has secured fully-committed bridge financing for the acquisition.

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