Reynolds American rumoured to be considering Lorillard acquisition

Reynolds American Inc. is rumoured to be considering making a bid for Lorillard, according to research notes issued by Wells Fargo Securities and based on a story yesterday in The Financial Times.

Neither Reynolds nor Lorillard have commented on the story.

Bonnie Herzog, managing director, beverage, tobacco and convenience store research at Wells Fargo, said that such an acquisition could produce considerable synergies and cost savings in respect of manufacturing, employment and e-vapor product development, given that certain conditions pertained.

Herzog said that a combined RAI and Lorillard would be an attractive strategic partner for British American Tobacco, which owns 42 percent of the equity in RAI.

And she said she expected that such an acquisition would be accepted by competition authorities, though perhaps on condition that some brands were divested.

Nevertheless, Herzog did express surprise at the timing of the move given the current lack of clarity over the U.S. Food and Drug Administration’s potential menthol regulation.