Reynolds buys Lorillard for $27.4bn, BAT to invest $4.7bn, Imperial buys $7.1bn assets

15th Jul 2014 12:57

US tobacco giant Reynolds American has agreed to buy rival Lorillard for $27.4bn, meaning Reynolds' 43%-owner British American Tobacco (BAT) will invest $4.7bn to maintain its stake.As a result of the deal, which is expected to complete in the first half of 2015, BAT said on Tuesday that it would be suspending its £1.5bn share buyback programme with effect from July 30th 2014.BAT's Chief Executive Nicandro Durante said: "We believe this is a good investment for our shareholders. We fully support the proposed deal which maintains our position in what will be a larger, more competitive business." The transaction is expected to be mildly accretive for BAT, which said it will subscribe for new Reynolds shares with funding from existing resources and debt.Fellow UK cigarette group Imperial Tobacco was also involved in the talks, as it has around a 3% share of US cigarette sales and is being sold certain brands from both Reynolds and Lorillard in order to limit antitrust concerns and help Reynolds finance the deal.Imperial's shares spiked initially before falling as details of its $7.1bn (£4.2bn) to secure the Winston, Maverick, Kool, Salem cigarette brands and US and international e-cigarette brand Blu. It was down 2.85% 2,661o by 13:37.After adjusting for the present value of the expected tax benefits of circa $1.5bn, the net acquisition cost for Imperial of $5.6bn (£3.3bn) implies a multiple of 6.9 times EBITDA. Shares in BAT were down 0.47% to 3,563.5p. OH