Firms Counsel $27.5 Billion Merger of Two Cigarette Manufacturers
Reynolds American Inc., maker of Pall Mall and Camel cigarettes, has agreed to buy Lorillard Inc. for $27.4 billion, including debt. If completed, the merger would create a powerful rival to the largest tobacco company in the U.S.—Altria Group Inc., the holding company of Philip Morris USA and owner of the Marlboro brand.
Reynolds American, based in Winston-Salem, N.C., is the parent company of R.J. Reynolds, the second largest tobacco company in the country. Combined with Greensboro, N.C.-based Lorillard, it would have a market value of about $50 billion and would give Reynolds the dominant menthol cigarette brand—Lorillard’s Newport—in the tobacco industry that has been declining in the U.S. and Western Europe for years.
The deal calls for U.K.-based British American Tobacco to buy additional shares of the combined company for $4.7 billion to maintain its current 42 percent stake in Reynolds. At the same time, the combined company will sell its KOOL, Salem, Winston, Maverick and blu electronic cigarette brands as well as other assets to U.K.-based Imperial Tobacco Group for $7.1 billion in cash and assumed debt, potentially heading off antitrust issues that Reynolds and Lorillard may face with the merger.
Representing Reynolds from Jones Day is a team led by New York-based M&A partners Randi Lesnick and Jere Thomson. Also involved were IP partner Warren Nachlis, who is based in New York and Boston, Washington, D.C.-based antitrust partner Joe Sims, San Francisco-based antitrust partner Craig Waldman, and Cleveland-based employee benefits and executive compensation partner Daniel Hagen.
Simpson Thacher & Bartlett represents Lorillard with M&A partners Robert Spatt and Eric Swedenburg leading a New York-based team made up of credit partner Brian Steinhardt, regulatory partners Kevin Arquit and Matthew Reilly, executive compensation and employee benefits partner David Rubinsky, tax partner Gary Mandel, tax counsel Steven Todrys, and IP partner Lori Lesser. M&A associates Sebastian Tiller, Allen Pan, Kirsten Popoff and Christian Jackson, regulatory associates Sara Razi, John Goheen and Sema Krikunova, executive compensation and employee benefits associates Douglas Tang, Holly Gurian, tax associate Sophie Staples, IP associate Marcela Robledo, and environmental associate Adeeb Fadil also worked on the deal.
Simpson Thacher’s London-based M&A partners Adam Signy and Derek Baird, credit partner Stephen Short and credit associate Lucy Jenkins were also involved on this deal.
Cravath, Swaine & Moore counseled British American Tobacco with a New York-based team led by M&A partners Ting Chen and Philip Gelston. Also involved were tax partner Michael Schler, antitrust partner Christine Varney, corporate associates Amanda Fenster and Wenying Zhang; and litigation associate Katherine Rocco.
Imperial Tobacco tapped Allen & Overy, with a New York-based team led by corporate partner Eric Shube. Assisting were antitrust partner Elaine Johnston, antitrust senior counsel David Ernst, and corporate senior counsel, Brian Jebb. Also involved were New York-based corporate associates Jochem Beurskens,Luisa Di Lauro,Michael Maier, Natalie Montano, Desma Polydorou,Shira Selengut and Loren Thomas.
Assisting London-based partners from Allen & Overy are corporate partner Jeremy Parr and senior associates Mark Davis and Sarah Shaw.
Kirkland & Ellis represents Lazard, financial adviser to Reynolds. Leading the corporate New York-based team were partners David Feirstein and Sarkis Jebejian. Associate Clement Smadja also worked on the deal.
Sullivan & Cromwell counseled Centerview Partners and Barclays, financial advisers to Lorillard. Its New York-based team includes corporate partner Francis Aquila, M&A partner Brian Hamilton, as well as M&A associate Bernd Delahaye.
If the merger goes through, the two companies together would control 42 percent of the U.S. cigarette market. Altria Group is the industry juggernaut, with $85.3 billion market capitalization. Its Marlboro brand alone commands more than 40 percent of the cigarette market in the U.S., according to the company.
The boards of directors of both Reynolds and Lorillard have already approved the merger, the companies said. Reynolds President and CEO Susan Cameron would lead the combined company, which would be headquartered in Winston-Salem. Murray Kessler, Lorillard’s chairman, president and CEO would join Reynolds board after the closing. Reynolds said it expects the transaction to close in the first half of 2015. Talks between the two principals were initially reported in May.
@|“New Deals” reports on major business transactions and the attorneys involved. MP McQueen is a reporter for affiliate Am Law Daily. Submit items by e-mail to email@example.com.