Friday, December 19, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Tobacco firm Reynolds American to buy Lorillard

By
From page B8 | July 16, 2014 |

RICHMOND, Va.— Joe Camel is bulking up to take on the Marlboro Man.

Camel cigarette maker Reynolds American Inc.’s $25 billion deal to buy Newport maker Lorillard Inc. creates a formidable No. 2 tobacco company in the U.S. behind Marlboro maker Altria. It also creates a powerhouse in menthol cigarettes, which are becoming a bigger part of the business and gives the combined company some breathing room even as people smoke fewer cigarettes every year.

The deal announced Tuesday also creates a new major player in the country’s tobacco market, the U.K.’s Imperial Tobacco, which is buying some of the companies’ other brands including Kool and Winston and instantly becomes the king of e-cigarettes in the U.S.

The deal also is a big indication that Reynolds sees electronic cigarettes as a promising side business but not the whole future. To get the acquisition done, Reynolds is ceding a commanding lead in the e-cigarette business by selling off Lorillard’s dominant Blu e-cig brand, highly visible because of its TV commercials featuring Stephen Dorff and Jenny McCarthy, to Imperial.

Reynolds and Lorillard value the deal at about $27 billion including debt. It is expected to close in the first half of 2015 but will likely face regulatory scrutiny. Lorillard shareholders would receive $50.50 in cash for each share and 0.2909 of a share in Reynolds stock at closing, a combination valued by the companies at $68.88 per share.

After the deal, company, which will remain based in Winston-Salem, North Carolina, is projected to have more than $11 billion in revenue.

To help to ease regulatory concerns about competition, Imperial Tobacco Group will buy the Kool, Salem, Winston, Maverick and Blu e-cig brands for $7.1 billion, tripling its share of the U.S. cigarette market. Imperial already owns Fort Lauderdale, Florida-based Commonwealth-Altadis Inc., maker of USA Gold cigarettes.

Reynolds will keep its Camel, Pall Mall and Natural American Spirit brands and acquire Lorillard’s flagship Newport brand, giving it 34 percent share of the U.S. retail cigarette market.

Newport and Camel are two of the largest players in menthol cigarettes. On its own, Newport accounts for 37 percent of the menthol segment. While people are smoking less, buying 19 percent fewer cigarettes overall in 2013 than five years earlier, menthol cigarette sales have fallen by only 7 percent and its share of the market grew 4 percentage points to about 31 percent, according to market researcher Euromonitor International.

“Cigarette volume in this country has been declining for a very, very long time, but … it’s important as we see consolidation and growth in market share, to have a true portfolio of iconic brands,” Reynolds CEO Susan Cameron said in an interview with The Associated Press, who also noted the potential to expand Newport in the western U.S. and Camel in the East, regions where each are weaker.

Despite selling Blu, Reynolds will remain in e-cigarettes and will focus on expanding its rechargeable Vuse e-cigarette brand, which expanded nationally last month after quickly becoming the top-selling brand in its initial test-market states of Colorado and Utah.

Cameron said the company is confident in Vuse’s “game-changing” technology that monitors and adjusts heat and power to deliver more consistent puffs.

But the menthol and e-cigarette markets aren’t a sure bet. Both face the possibility of heavier regulation.

The Food and Drug Administration is weighing restrictions on the minty smokes after a review concluded while there’s little evidence to suggest that they are more or less toxic or contribute to more disease risk than regular cigarettes, they likely pose a greater public health risk than regular cigarettes because younger people are more likely to start using them and that menthol smokers have a harder time quitting.

The agency also has proposed regulating battery-powered e-cigarettes, banning sales to anyone under 18, adding warning labels and requiring agency approval for new products. The devices produce vapor, usually nicotine-laced, instead of smoke.

Raising prices and cutting business costs has kept the industry profitable. The deal will help with the cost-cutting end: Reynolds expects to save about $800 million a year in costs.

The net effect on jobs and the economy in the American South’s tobacco country is uncertain. Reynolds, which has about 5,200 full-time employees and produces its cigarettes at its 2 million-square-foot Tobaccoville, North Carolina, plant, said it plans to hire, primarily in manufacturing, over 18 months following the closing.

Imperial is buying Lorillard’s manufacturing and offices in Greensboro, North Carolina, along with about 2,900 employees. Imperial did not say whether it would use Lorillard’s headquarters.

The combined company will challenge Altria Group Inc., owner of Philip Morris USA, which holds about half of the retail cigarette market. The company declined to comment on Tuesday’s news.

The companies said British American Tobacco PLC, which makes Kent and Dunhill cigarettes overseas, will maintain its 42 percent stake in Reynolds, and Lorillard shareholders will hold a 15 percent stake.

Reynolds and British American Tobacco also agreed to share technology related to the development and commercialization of next-generation tobacco products, including cigarettes that heat tobacco rather than burning it, and other nicotine-delivery products.

Lorillard’s stock fell $5.47, or about 8 percent, to $61.75 in afternoon trading Tuesday. Reynolds’ stock fell $3.27, or about 5 percent, to $59.91.

 

The Associated Press

The Associated Press

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

 
Sondheim’s ‘Woods’ holiday showcase for Missouri Street Theatre

By Amy Maginnis-Honey | From Page: B1 | Gallery

 
Groundbreakings, ribbon-cuttings play role in civic life

By Barry Eberling | From Page: A1 | Gallery

Frankye Kelly ready to spread holiday cheer

By Amy Maginnis-Honey | From Page: B1

 
Celebrate the magic of Christmas

By Tony Wade | From Page: A2, 2 Comments

 
Santas have busy week at schools

By Susan Hiland | From Page: A3, 1 Comment

 
Safe streets task force work nets 3

By Ryan McCarthy | From Page: A3

 
 
Solano College approves officers, meeting schedule

By Susan Winlow | From Page: A4

Longtime Suisun harbor master to retire

By Ian Thompson | From Page: A4

 
 
Fairfield police log: Dec. 17, 2014

By Susan Hiland | From Page: A12

 
Suisun City police log: Dec. 17, 2014

By Susan Hiland | From Page: A12, 1 Comment

Police arrest 2nd suspect in Fairfield credit union robbery

By Ryan McCarthy | From Page: A12 | Gallery

 
.

US / World

Spy’s parents search for son after Cuba-US deal

By The Associated Press | From Page: A1

 
Hope and some fear in Cuba amid thaw with US

By The Associated Press | From Page: A1

Next steps on Cuba: Normalizing could take awhile

By The Associated Press | From Page: A1

 
Sony hacking fallout puts all companies on alert

By The Associated Press | From Page: A1

Sony film took aim at North Korea’s biggest taboo

By The Associated Press | From Page: A1, 1 Comment

 
Timeline of the Sony Pictures Entertainment hack

By The Associated Press | From Page: A1

Digital dilemma: How will US respond to Sony hack?

By The Associated Press | From Page: A1

 
 
Local emergencies in Northern California counties after rain

By The Associated Press | From Page: A5

California’s top utility regulator defends record

By The Associated Press | From Page: A5

 
‘Pretty horrible’ scene; car slams into crowd

By The Associated Press | From Page: A5

 
Police: Drunk man shot while entering wrong house

By The Associated Press | From Page: A5, 2 Comments

Tsarnaev appears in court for 1st time since 2013

By The Associated Press | From Page: A6

 
President signs legislation ending Nazi benefit checks

By The Associated Press | From Page: A7

2 states challenge Colorado marijuana legalization

By The Associated Press | From Page: A8, 1 Comment

 
‘Prison Houdini’ set to make his 1st legal escape

By The Associated Press | From Page: A8

Top Islamic militants killed; more US troops going to Iraq

By The Associated Press | From Page: A8

 
Feds sue NYC over Rikers Island jail violence

By The Associated Press | From Page: A8

Russian sailors leaving France without warship

By The Associated Press | From Page: A9, 1 Comment

 
Putin: West wants to defang, declaw Russian bear

By The Associated Press | From Page: A10

European court rules obesity can be a disability

By The Associated Press | From Page: A13

 
Suspected Islamic extremists kidnap 185 in Nigeria

By The Associated Press | From Page: A13, 2 Comments

.

Opinion

Another look at school bonds

By George Guynn Jr. | From Page: A11, 2 Comments

 
Editorial Cartoon: Dec. 19, 2014

By Daily Republic Syndicated Content | From Page: A11

News of the day strikes a chord

By Bud Stevenson | From Page: A11, 2 Comments

 
 
.

Living

Today in History: Dec. 19, 2014

By The Associated Press | From Page: A2, 1 Comment

 
Community Calendar: Dec. 19, 2014

By Susan Hiland | From Page: A2

Horoscopes: Dec. 19, 2014

By Holiday Mathis | From Page: D8

 
Should I use Child Protective Services threat to get back rent?

By Kathy Mitchell and Marcy Sugar | From Page: D8

.

Entertainment

Week in preview Dec. 19-25, 2014

By Amy Maginnis-Honey | From Page: B1

 
Sweet ‘Night at the Museum’ bids farewell to Robin Williams

By The Associated Press | From Page: B2

Review: ‘The Hobbit’ wraps with a Middle Earth melee

By Jake Coyle | From Page: B2 | Gallery

 
Craig Ferguson to end 10 years as host of ‘Late Late Show’

By The Associated Press | From Page: B3

Eric Idle brings ‘Not the Messiah’ to Carnegie Hall

By The Associated Press | From Page: B3

 
Entertainment calendar Dec. 19, 2014

By Susan Hiland | From Page: B4

.

Sports

A’s trade All-Star catcher Derek Norris to Padres

By The Associated Press | From Page: B7

 
Warriors beat Thunder 114-109 after Durant injury

By The Associated Press | From Page: B7

 
A’s acquire lefty De La Rosa from Arizona for cash

By The Associated Press | From Page: B7

Raiders defense depleted by injuries

By The Associated Press | From Page: B7

 
49ers’ Harbaugh mum on reported offer from Michigan

By The Associated Press | From Page: B7

49ers’ Aldon Smith hopes to build off tough year

By The Associated Press | From Page: B7

 
Column: Thaw in US-Cuba relations warms up MLB

By Jim Litke | From Page: B8

Rivera: Newton ‘probably’ will start vs. Browns

By The Associated Press | From Page: B8

 
Bears bench QB Jay Cutler for Clausen

By The Associated Press | From Page: B8

‘Hands Up’ players to attend Ferguson Christmas party

By The Associated Press | From Page: B8

 
Celtics trade Rondo to Mavericks

By The Associated Press | From Page: B8

Rodriguez boys open Les Curry Tournament with victory

By Daily Republic staff | From Page: B8

 
39 bowl games and a reason to watch every one

By The Associated Press | From Page: B8

Signups for Friday, Dec. 19, 2014

By Paul Farmer | From Page: B9

 
This date in sports history for Friday, Dec. 19, 2014

By The Associated Press | From Page: B11

Sports on TV/Local sports for Friday, Dec. 19, 2014

By Paul Farmer | From Page: B11

 
.

Business

Roomiest Subaru Legacy debuts for 2015

By Ann M. Job | From Page: C1

 
Dow industrials have their best day in three years

By The Associated Press | From Page: B6

Ford expands drivers air bag recall nationwide

By The Associated Press | From Page: B6

 
Constantly changing online prices stump shoppers

By The Associated Press | From Page: B6

.

Obituaries

Lisa Dee McHughes

By Nancy Green | From Page: A4

 
Dominic C. Scolaro

By Nancy Green | From Page: A4

Ernest “Ernie” Moretti

By Nancy Green | From Page: A4

 
Travis Curt Price

By Susan Hiland | From Page: A4, 1 Comment

Jennie Ponce Reyes

By Nancy Green | From Page: A4

 
Patricia “Pat” Anne Stringfield-Pierre

By Nancy Green | From Page: A4

.

Comics