Reynolds American Confirms Discussions to Buy Smaller Rival Lorillard


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NEW YORK (TheStreet) -- Cigarette-maker Reynolds American  (RAI) confirmed it's in talks to buy smaller rival Lorillard  (LO), although both companies said there is no guarantee an agreement will be reached.

VIDEO TRANSCRIPT:

Cigarette-maker confirmed on Friday that it's in talks to buy smaller rival Lorillard, following months of speculation about a potential deal.

In separate statements, the companies said there is no guarantee an agreement will be reached.

The deal would require approval by London-based British American Tobacco (BTI), as it owns 42% of Reynolds American.  Reynolds said on Friday that is involved in the merger discussions and expects to support it.

A combination of the two companies stands to largely change the landscape of the tobacco industry.  Imperial Tobacco Group said it was in talks to buy some Reynolds and Lorillard brands if the merger occurs.  It would also put pressure on Philip Morris USA, a division of Altria (MO), which is the largest U.S. tobacco maker.  That's on top of shrinking demand for cigarettes in the U.S. as some smokers turn to alternatives like e-cigarettes, of which Lorillard says it holds a 45% dollar market share due to its blu eCigs brand.

In New York, I'm Brittany Umar for TheStreet.

-- Written by Brittany Umar in New York.

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