Merger mania!

I recently had a one-sided conversation with a senior executive on the supply side of the industry. His premise was Reynolds (American) was readying itself to buy Lorillard. I disagreed.

Further incensed by my lack of clarity he pushed on declaring it “was obvious / inevitable” – not to me it seems!

It had all been thought out. Reynolds buys Lorillard – relocating it to Whitaker Park in Winston-Salem, consolidating it into existing premises with all the staff reductions and cost savings imaginable.

This was further evidenced on the market side by the recent announcement from Reynolds to de-emphasize Kool. The conclusion was in favor of the soon-to-be Reynolds brand – Newport!

Good theory – I still don’t buy it.

What’s your thought?

9 comments ↓

#1 Top Seller on 12.01.08 at 8:40 PM

I think there might be some merit to that argument, and it certaintly makes sense for RAI to attempt to acquire Newport from Lorillard, but it is not something that can happen anytime soon. Furthermore, if Lorillard were to entertain bids for acquision, I doubt that RAI can outspend global giants such as Imperial or Japan Tobacco who would love to come into the US market with the No.2 cig on the US market. I think RAI is cutting back simply because these cutbacks and divesting of Kool are long overdue. RAI is too oversaturated in the market with brands that compete against each other and need to focus on growth brands not dying brands.

#2 BIG MO on 12.01.08 at 11:52 PM

Top Seller,

I’m thinking that the only brand other than low tier that has any type of serious growth over the past few years would be the brand to focus on called Newport! So why would you not think RAI would want a brand like this. I mean the only brand they have is Camel and Newport is stronger and more attractive. Newport has the BEST consumer demographic of all brands!

#3 Gamblingman on 12.03.08 at 11:52 PM

Hey Chris I was at NACS and had a high level conversation with Lorillard and I left with the impression that they were in the hunt to acquire. So I am in agreement with you but realize that we can speculate all we want and it won’t matter.

#4 Chris Crawley on 12.04.08 at 9:36 AM

Hi Gamblingman,
Your comment about Lorillard being a potential acquirer is interesting. I consider this quite possible – more specifically – a merger with someone like Swedish Match.

#5 Top Seller on 12.04.08 at 5:55 PM

Big Mo,

Yes, I agree, of course RAI wants it, who wouldn’t? I just don’t think RAI is the company that will make the best offer for acquision. But as Gamblingman rightly states, our speculation means nothing.

#6 Copenhagen Charlie on 12.04.08 at 10:14 PM

If a I was a betting man I’d put my money (what’s left) on Imperial! Just see them more interested with deeper pockets!

#7 Lou Maiellano on 12.10.08 at 3:58 AM

My sincere congratulations to a very good friend (Bryan Stockdale) on his promotion to President & CEO of Conwood and I also give praise to Rick Sanders on a job done extremely well at Santa Fe (you will be missed). Best of luck to Nicholas in your new role!

Reynolds American Names New Chief Executives

WINSTON-SALEM, N.C. — Reynolds American Inc. (RAI) appointed new chief executive officers for the company’s Conwood Co. LLC and Santa Fe Natural Tobacco Co. Inc. subsidiaries. The current chief executives of those two subsidiaries plan to retire in 2009.

“Reynolds American is in a dynamic and exciting period of its history,” Susan M. Ivey, chairman, president and CEO of Reynolds American, said in a statement. “As we further develop our business model of becoming a total tobacco company, we are fortunate to have two talented individuals with extensive industry experience ready to take on leadership roles at this pivotal time.”

Bryan K. Stockdale, 50, was named president and CEO of Conwood, the nation’s second-largest smokeless tobacco manufacturer, effective Feb. 1, 2009. Stockdale will succeed William M. Rosson, 60, who plans to retire after 34 years of service at Conwood. Stockdale is currently senior vice president of marketing operations for R.J. Reynolds Tobacco Co., Reynolds American’s largest subsidiary, and has worked for that company for 30 years. Rosson will remain with Conwood in an advisory role for a period of time after Stockdale joins the company to ensure a smooth transition.

Meanwhile, Nicholas A. Bumbacco, 44, was named president and CEO of Santa Fe Natural Tobacco Co., effective March 1, 2009. Bumbacco will replace Richard M. Sanders, 55, who plans to remain in an advisory transition position before retiring with 32 years of service on July 1, 2009. Bumbacco is currently president and CEO of RAI’s R.J. Reynolds Global Products Inc. subsidiary and has 20 years of experience in the global tobacco industry. RAI will be transitioning the lines of business formerly managed by R.J. Reynolds Global Products to other RAI subsidiaries, so no successor to Bumbacco in his previous position will be named.

“Both Bill Rosson and Rick Sanders have distinguished themselves in their leadership of their respective companies, overseeing tremendous growth and expansion at both businesses,” Ivey said. “We sincerely thank both of them for their decades-long commitment to their companies, their employees and their consumers.”

#8 EX WS on 12.12.08 at 3:17 AM

Must say I worked with Bryan and he is truly a gentleman. He was always a great individual to work with in Winston Salem! Best of luck! Protect my retirement!

#9 TAZ on 02.07.09 at 12:28 PM

Swedish Match and Philip Morris International announced February 3rd that they entered an agreement to create an exclusive 50-50 joint venture company, to be based in Stockholm, Sweden, to commercialize Swedish snus and other smokeless tobacco products globally by utilizing Swedish Match’s product development and manufacturing expertise and PMI’s sales and distribution infrastructure, as both companies believe snus can play a role in tobacco harm reduction.(Business Wire 02/03)

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