15th Jul 2014 11:33
BRISTOL (Alliance News) - Reynolds American Inc., a tobacco products company and the parent company of R.J. Reynolds Tobacco Company, and Lorillard Inc., announced they have entered into a definitive agreement in which RAI has agreed to acquire Lorillard in a cash-and-stock transaction currently valued at USD68.88 per Lorillard share, or a total of USD27.4 billion, including the assumption of net debt.
Upon closing, Lorillard shareholders will own approximately 15% of RAI. Lorillard shareholders will receive, for each Lorillard share, USD50.50 in cash and 0.2909 of a share in RAI stock at closing, representing USD68.88 per share based on RAI's closing share price on July 14. Susan Cameron, RAI's president and CEO, will continue in that role after completion of the acquisition. Murray Kessler, Lorillard's chairman, president and CEO, will join RAI's board after the closing of the deal.
RAI also announced that it has reached an agreement with Imperial Tobacco PLC, under which Imperial has agreed to purchase the KOOL, Salem, Winston, Maverick and blu eCigs brands and other assets and liabilities for a total consideration of USD7.1 billion in cash. RAI expects to receive net cash proceeds of approximately USD4.4 billion after taxes. Imperial will acquire certain assets owned by Lorillard including its manufacturing and R&D facilities in Greensboro, N.C., and approximately 2,900 employees, including a national sales force. The closing of the sale of these assets to Imperial is conditioned upon, among other things, RAI's completion of the acquisition of Lorillard.
The company also announced that, British American Tobacco PLC, RAI's largest shareholder, has agreed to vote its shares in favor of, the deal. British American Tobacco will maintain its 42% ownership in RAI through an investment of approximately USD4.7 billion.
RAI expects the transaction to be accretive to earnings in the first full year, with strong double-digit accretion in the second year and beyond (on a percentage basis). RAI expects to achieve cost savings of approximately USD800 million on a run-rate basis, primarily stemming from a reduction in corporate expenses and the assumption by Imperial of certain Lorillard operations along with the divested brands.
RAI said it plans to maintain current dividend policy until the transaction closes and is committed to a strong dividend policy thereafter, targeting a dividend payout ratio of 75% going forward. Lorillard will continue its existing dividend policy until the deal closes.
Copyright RTT News/dpa-AFX
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