Reynolds American In Talks To Acquire Lorillard

Reynolds American RAI confirmed Friday it is in talks to acquire Lorillard LO.

Imperial Tobacco Group PLC ITYBY is also negotiating with both Reynolds and Lorillard to acquire certain brands, Reynolds said. The brand acquisitions may address certain anti-trust concerns.

Cowen's Vivien Azer said anti-trust concerns won't require the sale of Reynold's key Camel brand.

Azer initiated coverage on Lorillard at Underperform with a $57 price target. Azer maintained a Market Perform rating on Reynolds.

As a 42 percent stakeholder in Reynolds, British American Tobacco PLC BTI is included in talks concerning the Lorillard acquisition, Reynolds said. If a deal is struck, BAT will subscribe for additional shares in Reynolds and maintain its 42 percent stake.

Rumors of the deal -- or some form of it -- have bubbled in recent months.

Most recently, London's Daily Mail tabloid earlier this week reported BAT would acquire Reynolds. A 10-year ban on BAT boosting its stake in Reynolds is set to expire July 30.

But Susan Cameron, who returned as Reynold's chief executive in May, is unlikely to facilitate a sale of the company within months of her return, Wells Fargo's Bonnie Herzog said. Cameron earlier served as Reynold's chief executive from 2004 to 2011.

Reynolds noted that there is no certainty of a deal.

Reynolds changed hands recently at $61.93, down 0.57 percent; Lorillard was trading at $66.00 per share, up 4.6 percent.

Imperial shares were up 1.7 percent to $93.56.