Imperial Tobacco Confirms Talks With Reynolds, Lorillard To Buy Some Assets

(RTTNews) - Imperial Tobacco Group Plc. (IMT.L, ITYBY.PK) Friday said it has noted the recent speculation relating to a potential transaction involving Reynolds American Inc. (RAI) and Lorillard, Inc. (LO), and that it is in discussions with the two companies to evaluate a possible acquisition of certain assets and brands owned by them.

Bloomberg reported Thursday that Reynolds is nearing a deal to acquire smaller rival Lorillard with the approval of British American Tobacco Plc.(BTI, BATS.L).

Reynolds American is the second-largest tobacco company in the U.S., while Lorillard is the third-largest. A potential merger of the two companies would create a bigger rival to industry leader Altria Group, Inc. (MO), which boasts of a 50 percent share of the U.S. tobacco market.

London-based British American Tobacco or BAT, the maker of Kent and Dunhill cigarettes, owns 42 percent of Reynolds and will have to approve a merger.

A ten-year standstill agreement between British American and Reynolds is set to expire in July, when British American can make an unsolicited offer for the Reynolds shares it does not already own.

Bloomberg reported that expiration of the agreement could pave the way for the two companies to work closer together amid a broad push for industry consolidation.

In order to assuage any anti-trust concerns that the U.S. government may have, London-based Imperial Tobacco will buy some brands from Reynolds and Lorillard, and is lining up about $7 billion for the purpose, the report added.

Imperial said today that the U.S. remains one of the world's largest and most profitable cigarette markets and the company would proceed with an acquisition only if its terms met strict transaction criteria.

''There can be no certainty as to the terms upon which any acquisition or related debt financing may be agreed or whether any transaction will take place. A further announcement will be made if and when appropriate,'' Imperial said in a statement.

IMT.L settled up 0.1 percent on Thursday at 2,662.60 pence.