Bloomberg News

Lorillard Rises After CNBC Says Reynolds Buyout in Works

July 03, 2014

Lorillard Inc. (LO:US), the fourth-largest U.S. tobacco seller, rose the most in more than a month after CNBC reported that it may be taken over by Reynolds American Inc. (RAI:US) within weeks.

The shares surged 5 percent to $64.18 at 10:52 a.m. in New York and earlier climbed as much as 6.3 percent for the biggest intraday gain since May 21. The shares had advanced 21 percent this year through yesterday. Reynolds rose 1.8 percent to $61.25.

Reynolds has explored the purchase for several months and had been stymied by the complexity of a potential agreement, people with knowledge of the matter have told Bloomberg. Reynolds’s largest shareholder, British American Tobacco Plc (BATS), has been involved in the on-again, off-again talks, the people said, asking not to be identified discussing private information.

CNBC reported today that a potential deal is back on track and may be announced this month, citing people it didn’t identify.

Bob Bannon, a spokesman for Greensboro, North Carolina-based Lorillard, and David Howard, a spokesman for Winston Salem, North Carolina-based Reynolds, declined to comment.

Talks have fallen apart on several occasions, with three companies involved and antitrust implications to consider complicating a potential deal, the people have told Bloomberg. Deterrents also include Lorillard’s price and BAT’s efforts to sell some of its own brands, one of the people said.

Antitrust Issues

Some of the antitrust issues may be alleviated by Imperial Tobacco Group Plc (IMT)’s plan to sell 30 percent of its stock in its Madrid unit, Compania de Distribucion Integral Logista Holdings SA, this month to raise about $800 million. That may put Bristol, England-based Imperial in a better position to snap up the assets that regulators would probably force Reynolds and Lorillard to offload in order for any deal to go through.

Speculation about the deal has heated up trading in Lorillard’s options. Demand for bullish calls on the maker of Newport and Maverick cigarettes, reached a four-year high last month relative to puts, according to data compiled by Bloomberg.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editors responsible for this story: Kevin Orland at korland@bloomberg.net Bruce Rule


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Companies Mentioned

  • LO
    (Lorillard Inc)
    • $62.87 USD
    • -0.68
    • -1.08%
  • RAI
    (Reynolds American Inc)
    • $65.2 USD
    • 0.25
    • 0.38%
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