Maxi merger in the tobacco sector. Reynolds and Lorillard have formalized the 56 billion dollar nuptials that will give birth to the world number two, able to give a hard time to the market leader, Altria Group, which holds a 50% market share with the best known brands of cigarettes, including Marlboros. Joining, therefore, are Reynolds American, owner of the Camel and Pall Mall brands, and Lorillard, leader in the menthol cigarette market, but also in the thriving electronic cigarette market. In fact, Lorillard has a dominant position in the sale of low-cost "e-cigarettes" at fuel stations and second-hand points of sale, with a market share of 50%.
The deal will have a knock-on effect for UK rivals British Tobacco, which owns 42% of Reynolds' capital, and Imperial Tobacco, which has confirmed its intention to buy the assets of the merged group. Reynolds and Lorillard have agreed on the key points of the agreement, namely the price, while some details are still to be finalized, such as which cigarette brands and production plants to dispose of, in order to dampen the Antitrust concerns.
Negotiations between the two companies started at the beginning of the year and intensified in recent days; the announcement of the final agreement, as desired by the interested parties, should arrive next week. However, the agreement remains the subject of evaluation by the competition regulator.
