Imperial Tobacco in $7bn swoop for top American cigarette brands
Imperial is waiting in the wings for America’s number two cigarette seller Reynolds to agree a $23 billion takeover of Lorillard
Friday 11 July 2014
Alison Cooper is poised to pull off her biggest move since she became Imperial Tobacco's chief four years ago by spending up to $7 billion buying some of America’s best-known cigarette brands.
The deal, which Imperial today revealed is being negotiated, could move the British firm from being one of the bit players in the United States market to a serious contender.
Imperial, the world’s fourth-biggest tobacco company, is waiting in the wings for America’s number two cigarette seller Reynolds to agree a $23 billion takeover of number three player Lorillard. That would force the merged companies to sell off some key brands to meet US competition rules.
Imperial is believed to be primarily interested in the Winston, Kool, Salem and Kent brands while Reynolds would add Lorillard’s Newport to its existing Camel and Pall Mall brands.
Imperial said: “The USA remains one of the world’s largest and most profitable cigarette markets. Imperial would proceed with an acquisition only if its terms met strict transaction criteria.”
Imperial said it could not comment any further or add to today’s statement. Analysts said a deal could come as early as next week but could also take longer to thrash out.
Buying the brands is likely to cost between $5 billion and $7 billion, according to industry sources. Imperial is floating its Spanish logistics business which should see it collect $800 million from selling off a 30 per cent stake.
The whole multi-billion merger and sell-off is being largely orchestrated in London where British American Tobacco owns a 42 per cent stake in Lorillard and will have to give the go-ahead for the $56 billion merger which would create a company with annual sales of $13 billion.
The US is dominated by Marlboro maker Altria, the former Philip Morris, which has more than half the market with annual revenues of $17.7 billion. Reynolds has 27 per cent and Lorillard 15 per cent. Imperial has just 3 per cent.
Cigar-smoking Cooper has forced Imperial to concentrate on its top brands worldwide including Gauloises, Davidoff and JPS.
She is cutting the original 250 brands she inherited at least in half but big US brands like Kool, Salem and Winston would be a huge boost to her portfolio.
Imperial shares rose 92p to an all-time high of 2751p.
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