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Tue July 15, 2014
Reynolds Acquisition of Lorillard a "Blockbuster of a Deal for the Triad"
Reynolds American announced last week that it was in talks with Lorillard about a possible acquisition, a deal that had been rumored for months.
Nonetheless, when specifics about the deal were released Tuesday, July 15 it contained some surprising details. Ultimately, Reynolds will acquire Lorillard as expected but will sell off not only some major parts of Lorillard’s portfolio – including blu eCigs – but also some of Reynolds long-time brands including the KOOL, Winston and Salem brands. The buyer of those properties is the British company Imperial Tobacco Group.
Andrew Brod, a senior research fellow for UNC Greensboro’s Center for Business and Economic Research, says the deal raises many questions – including why Reynolds is selling off so much of what it plans to buy. It may have been because Reynolds wants cash to finance the deal, or is trying to reduce anti-trust scrutiny.
Whatever the reason, Brod says he’s cautiously optimistic about the local impact of the deal.
If Reynolds purchased Lorillard outright, it likely would have led to job losses as the two companies came together and duplicate jobs were eliminated. Brod says that picture is a little less clear now depending upon whether Imperial decides it needs a Greensboro headquarters.
Brod says the upshot of the acquisition is that Reynolds is buying Lorillard to get the Newport brand, the second-best selling cigarette brand in the country behind Marlboro. He says the purchase shows that despite the growth of electronic cigarettes, Reynolds still values the traditional combustible product.
The $27.4 billion deal is the latest in a series of sweeping changes for Reynolds American. In May the company announced plans to expand its Tobaccoville facility as part of a nationwide rollout of its Vuse e-cigarette, Last month, the company also announced the sale of its historic former headquarters in downtown Winston-Salem.