Imperial Tobacco has confirmed it is in talks to buy US cigarette brands from Reynolds American and Lorillard if the two tobacco firms agree a merger.
In a short statement to the market this morning Imperial said it was “evaluating 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 and Lorillard, the second and third largest US cigarette makers, are currently locked in advanced merger talks with latest media reports suggesting the merger may be imminent. The combined entity would be likely to be forced to divest some brands by US competition authorities.
Reynolds’ brands include Camel and Pall Mall while Lorillard’s biggest brands are Newport and Kent.
Imperial’s share price jumped 74p (2.8%) in early trading on the news to reach 2,733p. The company’s shares have climbed by approximately 25% since January.
However, Jefferies analyst Martin Deboo was more cautious on the potential benefits for Imperial.
“IMT will no doubt argue that such a deal would transform its position in the USA and confer the scale in the market that it has historically lacked… But the assets likely to be on offer don’t feel hugely attractive to us.”
“We believe that any deal would be dilutive to IMT’s top-line growth in what is already a low-growth business.”
He speculates that the brands potentially in play for Imperial are Kool, Salem, Doral and Maverick.
Meanwhile, the offer price for the spin-off of Imperial’s European logistics arm Logista on the Spanish stock exchange has been set at €13 per share, indicating a market capitalisation of around €1.7bn.