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Lorillard Nosedives On 3-Way Deal Announcement

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The long-rumored deal between Reynolds American (NYSE: RAI) and Lorillard (NYSE: LO) was officially announced Tuesday.

Reynolds will take ownership of Lorillard for $27.4 billion of cash and stock, or $68.88 per share.

The deal will take place just 2.5 percent above Lorillard’s previous close, but 40.4 percent higher than Lorillard shares were trading during initial media speculation. Lorillard shareholders will receive $50.50 cash and 0.2909 Reynolds shares.

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Reynolds also announced the sale of KOOL, Salem, Winston, Maverick and blu eCigs brands to Imperial Tobacco (OTC: ITYBY) for $7.1 billion. Imperial will also receive some of Lorillard’s manufacturing and R&D facilities. After taxes, Reynolds says it will receive $4.7 billion from the transaction.

Reynolds CEO Susan Cameron will continue to lead the combined company while Lorillard’s president and CEO, Murray Kessler, will join the Reynolds board.

Shares of Lorillard are selling off sharply in premarket trading. The issue was recently down 5.4 percent to $63.58.

Shares of Reynolds were down 2.66 percent, while Imperial was unchanged.

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