British American Tobacco lifted by Lorillard merger rumours

22nd May 2014 16:27

US cigarette maker Reynolds American, which is 42 per cent owned by British American Tobacco (BAT), is reported to close to a deal to merge with rival Lorillard.Reynolds is in active discussions to merge with Lorillard, according to the Wall Street Journal.Other than keep a diluted stake or sell it for a shareholder windfall, Citi analysts suggest BAT should try and up its stake in the new company. "We think it would be advantageous [for BAT] to increase its stake in the combined company," analysts wrote.While RBC Capital Markets noted that the British company "has the cash to buy Reynolds outright as it stands", although it would need some help to buy the combined company.Shares n BAT rose 0.48% to 3,543p at 16:35. OH