The UK Financial Times published an article today that Reynolds American (RAI,) the US holding company for RJR Reynolds Tobacco Company – is considering acquiring Lorillard Tobacco – effectivley merging the #2 and #3 tobacco companies in the USA.
This is not new – but the timing is. Rumors of RAI acquiring Lorillard have been around for several years. Is this wishful thinking?
From one perspective it makes sense. RAI could easily merge Lorillard’s manufacturing into existing facilities – for a huge cost saving. The Lorillard business is hugely profitable. And there are further easily realizable cost-savings from consolidation.
On the other hand acquiring Lorillard now, prior to the FDA ruling on Menthol cigarettes (Newport is the US’ leading menthol brand) and e-cigarettes (Blu is the leading US e-cigarette,) looks premature.
Besides this the FTC may not like (or agree) a merger. RAI would own Newport, Kool and Salem – the number 1, 2 and 3 menthol brands in the US.
Would a combined operation compete more effectivley with Altria?
What do you think??
Who stands to benefit the most?