Lorillard and Reynolds American Both Trending Down Amid Bank of America's Report on Rumored Deal

In a report issued Thursday, Bank of America highlighted a possible deal in which Reynolds American RAI would purchase Lorillard LO. The rumor of the deal was first reported by Reuters just before the close on Wednesday. Shares of Lorillard popped up 4 percent with this news but have come back down since that point. Bank Of America analyst Lisa K. Lewandowski sees Lorillard as an attractive takeover candidate because of their market position with Newport. Howver she also sees that the only way this deal could get done is if Reynolds American is backed by British American Tobacco (BAT). Lewandowski sees that the merger of the two companies would make sense from a product standpoint as one specializes in premium cigarettes and the other in value cigarettes. However government regulators might see the menthol share as too high. Bank of America has raised the target price of both companies to $63. Lorillard is down 3.62 percent to $60.37 and Reynolds American is down 1.37 percent to $58.95 at last checked trade Thursday.