11th Jul 2014 06:55
LONDON (Alliance News) - Imperial Tobacco Group PLC Friday confirmed it is in talks with US tobacco firms Reynolds American Inc and Lorillard Inc to potentially buy some of their assets.
Reynolds is nearing a deal to acquire smaller rival Lorillard with the approval of British American Tobacco PLC, which owns 42% of Reynolds, Bloomberg reported Thursday, citing people with knowledge of the matter. A deal may reportedly be announced as early as next week, although the talks could still fall apart, the Financial Times reported.
A ten-year standstill agreement between British American and Reynolds is set to expire in July 2014, when British American can make an unsolicited offer for the Reynolds shares it does not already own. Bloomberg reported that expiration of the agreement could pave the way for the two companies to work closer together amid a broad push for industry consolidation.
In order to assuage any anti-trust concerns that the US government may have, London-based Imperial Tobacco will buy some brands from Reynolds and Lorillard, and is lining up about USD7 billion for the purpose, Bloomberg reported.
Lorillard sells Newport menthol cigarettes and Blu electronic cigarettes. The company acquired SKYCIG, a British electronic cigarette business, in October 2013.
A potential deal would combine Reynolds cigarette brands such as Camel, Pall Mall and Kool, with Lorillard's top-selling Newport menthol cigarettes. It would also enable Reynolds to gain a commanding position in the fast-growing market for electronic cigarettes that represents a growing alternative to traditional cigarettes.
In its statement, Imperial Tobacco said it would only proceed with the potential acquisitions if the terms meet its "strict" acquisition criteria.
"There can be no certainty as to the terms upon which any acquisition or related debt financing may be agreed or whether any transaction will take place. A further announcement will be made if and when appropriate," it said.
By Steve McGrath; [email protected]; @stevemcgrath1
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