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RJ Reynolds Tobacco will spend 20 billion dollars to buy Lorillard cigarette company


U.S. tobacco giant RJ Reynolds plans to buy local rival Lorillard tobacco company for more than $ 20 billion dollars. This purchase will allow the second-largest North American tobacco producer (it holds 25% of the cigarette market) occupy a dominant position in menthol and electronic cigarettes sigment. However, aggravated by debts, Reynolds company don't have enough equity capital to purchase Lorillard tobacco company, so in this transaction can participate British American Tobacco (BAT), which owns 42% of the shares of its Reynolds American.

RJ Reynolds started consultations with the investment bank Lazard about the acquisition of the third largest manufacturer of cigarettes in America Lorillard company (which has 15 % of sales) reported The Financial Times. Lorillard 's capitalization is 19.4 billion dollars, the cost of one share is about 53.6 dollars. Experts think that this acquisition to RJ Reynolds company will cost more than $ 20 billion. "Reynolds offered to Lorillard a deal for 60 dollars per share, but the company rejected this offer. Lorillard will insist on a price not less than $ 62 per share"- said the business correspondent Ben Harrington in his blog Betaville. The rumors about this deal starts in 2008, when the company reduced its marketing support for Kool cigarettes, its key brand in the segment of menthol cigarettes. The fact is that 80% of Lorillard's company sales are provided by menthol cigarettes, and Newport cigarette brand controls 37% of menthol cigarettes market. Now Lorillard is a "tasty morsel" on the tobacco market. Company revenues in 2013 increased by almost 5%, to $ 6.6 billion and incomes jumped by 8.5%, to $ 1 billion.

While Lorillard was the first major company which began to develop the direction of electronic cigarettes sales by buying in 2012 "Blu" e-cigarette brand for 135 million dollars. Now she leads the U.S. electronic cigarette market with 37.2% share. Their sales on results of year amounted to 230 million dollars, while in the fourth quarter rose by 38.5%. Last year, RJ Reynolds company and the largest local cigarette producer Altria (which controls almost 50% of tobacco market) also launched their own brands of electronic cigarettes (Vuse and MarkTen respectively).