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Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
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Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides

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Reynolds American announced that it would buy rival Lorillard in a $27.4 billion deal, but investors aren't happy. Find out why.

Reynolds American announced that it would buy rival Lorillard in a $27.4 billion deal, but investors aren't happy. Find out why.

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  • 1. Why Investors Hate the Reynolds-Lorillard Merger, In 8 Simple Slides
  • 2. What’s Behind Today’s Plunge? • Yet merger talk had circulated for months, so what shocked investors so much? Both Reynolds and Lorillard shares fell sharply today after news of the merger.
  • 3. Basic Terms of the Deal Weren’t Unreasonable • Lorillard shareholders will receive $50.50 per share in cash. • They’ll also receive 29.09 shares of Reynolds American for every 100 Lorillard shares they own. • Reynolds touts deal’s premium, but compares share prices from before merger talk began. Total deal value is $27.4 billion, or $68.88 per share.
  • 4. Reynolds Hopes for Big Benefits • Better product balance, as Newport adds menthol exposure. • Synergies will help drive R&D and innovation for new products. • Expected to be accretive to earnings in first year after merger. • Cost savings will help boost strong dividends in the future. CEO Susan Cameron lists reasons favoring merger. Reynolds CEO Susan Cameron. Source: Reynolds American.
  • 5. But Huge Changes Were Unexpected • Reynolds American will keep the key Newport brand. • But Imperial Tobacco will buy several of Lorillard’s other key brands: – KOOL, Salem, Winston, and Maverick will go to Imperial. – Result: Imperial will see its U.S. market share triple. Source: Lorillard.
  • 6. The Biggest Blunder: Selling blu • Reynolds is committed to its competing Vuse brand. • But blu is the strongest e- cigarette brand in terms of market share and has a huge first-mover advantage over Vuse and other e-cigs. As part of the deal, Imperial will buy blu eCigs. Source: Lorillard.
  • 7. Reynolds Will Face Big Potential Risks • Adverse FDA menthol decision could crush Newport’s value to Reynolds. • Vuse could prove unable to catch up to blu eCigs success. • Introduction of Imperial Tobacco as new, bigger U.S. competitor changes dynamics of the entire industry. • Merger doesn’t change negative trends in sales volume. Source: Wikimedia Commons.
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