You are here
WINSTON-SALEM, N.C. — Reynolds American Inc. (RAI) will complete its acquisition of Lorillard Inc. this week, one month shy of the one-year anniversary of the deal's announcement.
In a release Monday morning, RAI and Lorillard said the federal district court overseeing a remedial order in relation to a lawsuit brought by the U.S. Department of Justice against subsidiaries of RAI and Lorillard, along with other companies, has approved the sale of certain cigarette brands and businesses to Imperial Tobacco's ITG Brands LLC subsidiary.
This court approval was the final significant piece of the puzzle. With it complete, the deal is expected to close Friday, June 12.
"We are very pleased to be able to proceed with this transformative acquisition," said Susan M. Cameron, RAI's president and CEO. "With the addition of Lorillard's strong Newport brand, RAI's operating companies will have brand portfolios that reflect diversification and strength across product categories and across geographies."
Cameron added she expects the transaction to provide RAI with additional resources to invest in innovation, research and development and its operating companies' brands.
"Investing in innovation will benefit adult tobacco consumers and wholesale and retail customers alike," she said.
Under the agreement structure, Winston-Salem-based RAI will buy Greensboro-based Lorillard for $27.4 billion and keep the Newport brand, which represents 90 percent of Lorillard's existing sales and profitability, as well as the True and Old Gold brands. United Kingdom-based British American Tobacco, RAI's largest shareholder, will maintain its 42-percent ownership in RAI through an investment of approximately $4.7 billion.
Once that transaction closes, Imperial Tobacco will pay $7.1 billion for the Winston, Kool and Salem brands from RAI and the Maverick and blu eCig brands from Lorillard. These acquisitions will build on Imperial's existing U.S. portfolio at Commonwealth-Altadis, which currently accounts for a 3-percent share of the U.S. market, principally through the USA Gold brand.
In addition, United Kingdom-based Imperial will acquire Lorillard's infrastructure, which includes the company's manufacturing facility, headquarters offices, research and development facility, and approximately 2,900 employees. Hereafter, Imperial's new U.S. subsidiary will be known as ITG Brands and be based in Greensboro, N.C.
Following the transactions, RAI is projected to have more than $11 billion in annual revenues and approximately $5 billion in annual operating income. Its operating companies will have key brands across major industry categories: Newport, Camel, Pall Mall and Natural American Spirit in combustible cigarettes; Grizzly in smokeless tobacco; and VUSE in the vapor market.
"This is an important milestone in our ability to deliver value to our shareholders, and benefits to our customers, consumers and employees," said Murray Kessler, Lorillard's chairman, president and CEO. "We look forward to continuing to work with Reynolds American and Imperial Tobacco to successfully complete these transactions."
Kessler will join RAI's board of directors following the closure of the transactions.