NEW YORK -- Reynolds American (IW 500/132) will buy Lorillard for $27.4 billion and sell cigarette brands including Salem and Winston to British firm Imperial Tobacco for $7.1 billion, the companies said Tuesday.
The deal combines Reynolds American Inc. (RAI), the parent company of RJ Reynolds, maker of Camel and Pall Mall cigarettes, and Lorillard, whose Newport cigarette is the best-selling menthol brand and the second-best selling cigarette in the U.S.
The combination of Reynolds American, the second-largest US tobacco company and number-three Lorillard challenges market leader Altria, maker of Marlboro cigarettes.
RAI also announced that British firm Imperial Tobacco will purchase its cigarette brands, including menthol cigarettes Kool and Salem, and Winston, and other assets for $7.1 billion in cash.
"The addition of these brands to Imperial's U.S. operations will more than triple its share of the U.S. cigarette market, position it for long-term success in traditional tobacco products and the growing e-cigarette category, and elevate it to the status of a major U.S. competitor for the first time," RAI said.
British American Tobacco, RAI's largest shareholder, backed the deal and will maintain its 42% stake through an investment of about $4.7 billion.
The RAI-Lorillard combined company will have more than $11 billion in revenues and about $5 billion in operating income, the firms said in a joint statement.
RAI said it expects to book post-tax net cash proceeds of about $4.4 billion from the sale of assets to Imperial Tobacco.
As part of that asset sale, Imperial will acquire certain Lorillard assets, including its manufacturing and research and development facilities in Greensboro, North Carolina, and some 2,900 employees, including a national sales force.
The sale of those assets to Imperial is conditioned in part on RAI's completion of the acquisition of Lorillard.
Copyright Agence France-Presse, 2014