Cases & Deals

Reynolds American acquires Lorillard for $27.4 billion

Client(s) Reynolds American Inc.

Jones Day advised Reynolds American Inc. (NYSE: RAI) in its acquisition of Lorillard, Inc. for $27.4 billion and in the related $7.1 billion divestiture to an affiliate of Imperial Tobacco Group and $4.7 billion investment by British American Tobacco, RAI's largest shareholder. RAI has acquired Lorillard in a cash-and-stock transaction currently valued at $68.88 per Lorillard share, or a total of $27.4 billion, including the assumption of net debt. Under the terms of the transaction, which has been unanimously approved by the boards of directors of both companies, Lorillard shareholders received for each Lorillard share, $50.50 in cash and 0.2909 of a share in RAI stock at closing, representing $68.88 per share based on RAI’s closing share price on the day prior to announcement.

RAI also has reached an agreement with Lignum-2, L.L.C., a wholly-owned subsidiary of Imperial Tobacco Group PLC, the fourth-largest international tobacco company, under which Lignum-2l has purchased the KOOL, Salem, Winston, Maverick, and blu eCigs brands and other assets and liabilities for total consideration of approximately $7.1 billion in cash. As part of the divestiture, Lignum-2 acquired certain assets owned by Lorillard including its manufacturing and R&D facilities in Greensboro, N.C. and approximately 2,900 employees, including a national sales force.

As part of the transaction, BAT will maintain its 42 percent ownership in RAI through an investment of approximately $4.7 billion (based on RAI’s closing share price of $60.16 as of July 2, 2014, which is also the reference price that is the basis for determining the share component of the consideration to be paid to Lorillard shareholders).