Cigarette giant Reynolds American announced Tuesday it was buying rival Lorillard in a $27 billion deal that unites two of the country's biggest tobacco companies.
The acquisition creates a giant to rival Philip Morris USA, which is owned by Altria Group Inc., the No. 1 tobacco company in the country. Altria's Marlboro brand dominates the U.S. cigarette market.
Reynolds sells Camel and Pall Mall cigarettes; Lorillard markets Newport and Kent, but it's also the market leader in e-cigarettes and menthol cigarettes, the fastest-growing segments of the tobacco market.
Tuesday's deal is likely to face scrutiny from antitrust regulators.
Here's more from The New York Times:
"Two other companies are also involved in the complicated transaction. The Imperial Tobacco Group plans to buy several billion dollars' worth of brands — including Kool, Salem and Winston cigarettes and Blu e-cigarettes — from the combined company for $7.1 billion."And British American Tobacco, which already owns 42 percent of Reynolds, will buy additional shares to maintain that same level of ownership in the combined company and help finance the deal."
The deal, The Times notes, will give Reynolds a share in the menthol and e-cigarette markets.
The Wall Street Journal provides context for the deal: "The potential combination comes as tobacco majors try to increase scale and cut costs amid a yearslong decline in U.S. cigarette consumption, including an estimated 4% contraction last year, even as profits remain robust."
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