Imperial Tobacco eyes US cigarette brand deals

Tobacco company aiming to buy brands owned by Reynolds and Lorillard in a bid to expand presence in $90bn US market

Lambert and Butler cigarettes/Imperial Tobacco

Lambert and Butler cigarettes. Imperial Tobacco: said: ‘Imperial confirms it is in discussions with Reynolds and Lorillard to evaluate a possible acquisition of certain assets and brands owned by Reynolds and Lorillard’. Photograph: Bloomberg/Bloomberg via Getty Images

Imperial Tobacco is in talks to buy cigarette brands from Reynolds and Lorillard if the two US tobacco companies complete a planned $56bn merger that is set to shake up the global tobacco market.

The US companies are in advanced talks about a deal that would combine the second and third biggest US cigarette makers. Imperial is in line to buy up brands they could be made to sell by the US competition authorities – a deal that would accelerate its desired expansion in the US.

The news sent Imperial’s shares up 3.9% to £27.63, making the company the biggest riser in the FTSE 100 index.

The UK company, whose brands include Gauloises, JPS and USA Gold, said: “Imperial confirms it is in discussions with Reynolds and Lorillard to evaluate a possible acquisition of certain assets and brands owned by Reynolds and Lorillard.

“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.”

Reynolds’ brands include Camel and Pall Mall while Lorillard’s include Newport and Kent.

A spokesman for Imperial declined to discuss which brands the company might acquire. Reports have said the Bristol-based company could spend up to $7bn (£4bn) to buy surplus assets from the merger that could include Reynolds’ Kool and Salem.

Reynolds and Lorillard have been in talks for months over a deal complicated by competition concerns and British American Tobacco’s 42% stake in Reynolds. The deal, and the sale of assets to Imperial, would leave Imperial as one of three big players in the $90bn US tobacco market.

Alison Cooper, Imperial’s boss and one of the few FTSE 100 women chief executives, has been looking for ways to accelerate the company’s growth.

Buying brands from the US companies would give Imperial extra scale in the US, which remains the third biggest consumer of cigarettes in the world despite years of decline. About half the US market is controlled by Altria, which makes Marlboro.

Imperial entered the US in 2007 by buying Commonwealth Brands, which was then the fourth-biggest American tobacco company. The UK company said in May that its flagship USA Gold brand had gained market share in target states and that growth in the US was one of its main goals.

Source: Theguadian

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