Reynolds American Inc (RAI) said it plans to acquire Lorillard with a cash-and-stock package valued at USD 27.4 billion (EUR 20.2 billion), an offer that would merge the country's second and third largest cigarette companies.

The offer, which has been approved by the boards of directors of both companies, means “Lorillard shareholders will receive, for each Lorillard share, USD 50.50 (EUR 37.15) in cash and 0.2909 of a share in RAI stock at closing, representing USD 68.88 per share based on RAI’s closing share price yesterday,” according to a statement by Reynolds. RAI would assume Lorillard net debt.
As part of the agreement, a subsidiary of Imperial Tobacco will also acquire a mixture of assets from both companies, including cigarette brands Winston, Salem and Kool; e-cigarette brand blu eCig, as well as Lorillard’s manufacturing and R&D facilities in Greensboro, North Carolina, for USD 7.1 billion.
Subject to shareholder acceptance and approval by US regulators, RAI said it expected to close the transactions in the first half of next year.
Lorillard shareholders would own 15 per cent of RAI under the current proposal. British American Tobacco (BAT) which currently owns 42 per cent of RAI would retain the same equity share through an investment of around USD 4.7 billion.
Reynolds confirmed plans to pursue an ongoing technology-sharing initiative with BAT for the development and commercialisation of next-generation tobacco products, including heat-not-burn cigarettes and vapour products.
Imperial said it hoped to improve its competitive position through the new arrangement. “This is a great opportunity to transform our US business and secure a significant presence in the world’s largest accessible profit pool. We plan to build a US brand portfolio through national distribution and create a stronger, more competitive business” said Chief Executive Officer Alison Cooper.