British American Tobacco Could Merge With Reynolds or Lorillard

August 15th, 2014 00:00

The Times of London on Monday revealed that British American Tobacco (BAT), Britain's major cigarette company, requested Deutsche Bank to deal with UBS concerning likely financial promotions in the United States. It was noted that BAT has employed the banker to suggest the company on probable purchases and offers. There were outlined possible chances with Reynolds.


Next to the report, Societe Generale released a note declaring that Lorillard is a better quality company than Reynolds. The expert explained that British American Tobacco, who is the owner of around 42 % of Reynolds, refused an offer this current year as the companies didn't have sufficient synergies as a result of an absence of similar geographies.

Societe Generale also stated that rumors over the chance of Reynolds American joining with Lorillard to set up a solid U.S. position, “may have altered BAT's thinking.” Lorillard at the moment owns 15 % of the market share in the United States. Even though it is considerably smaller than Reynolds, the maker owns the number two premium Newport cigarette brand. Societe Generale claimed that BAT may consider that it could expose this brand globally. The expert wants BAT to look at growing markets for any possible purchases, it advised the company to look at Indonesia or buy Brazil and Malaysia minorities.

Bank of America expert Lisa Lewandowski has said that reports of a possible merger with Reynolds or Lorillard is not a new info. About 75 % of Lorillard's sales in the previous year constituted of menthol cigarettes, with more than 85 % of revenue. Lewandowski said that if a business could purchase Lorillard, they would have to be “very secure” with the menthol position in the United States. If BAT were to join with Lorillard, they would hold about 70 % of share in menthol.

Bank of America increased the price aimed on Reynolds American and Lorillard from $57.00 to $60.00, anticipating market rotation and the companies tactical premium to carry on. About a month later, BAT CEO Nicandro Durante reported that the company would never opt for Reynolds with an aggressive bid.
Shares of Lorillard have increased by 16.5 % year-to-date. Reynolds American stock has also risen by 15 % year-to-date

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