Boston, MA 05/19/2014 (wallstreetpr) – The $112 billion market capped cigarette manufacturer, British American Tobacco PLC (ADR) (NYSEMKT:BTI), is rumored to be circling two U.S. peers for a possible tie-up deal sooner or later. The company already holds a significant equity position in the U.S. No. 2 cigarette manufacturer Reynolds American, Inc. (NYSE:RAI).
However, the company is reportedly interested in another U.S. cigarette company, the No. 3 in the country, Lorillard Inc. (NYSE:LO), for a possible acquisition.
While rumors about possible talks among the companies are widespread, BTI or its potential targets have not come out clearly to state their intentions. In any case, analysts have also been going back and forth over the speculations.
Nonetheless, recent developments at Reynolds betray a deal. The company recently announced a change of guarded whereby a former top executive returned to the company. Susan M. Cameron turned to head the Camel cigarettes maker, replacing Daniel Delen, who stepped down. The ascension of Ms Cameron has heightened speculation that Reynolds might be gearing up for some big changes.
Significant stake
British American Tobacco PLC (ADR) (NYSEMKT:BTI) owns 42 percent stake in Reynolds and the two companies also entered into a standstill agreement that prevents the former from pursuing a hostile takeover of the latter. However, that standstill agreement expires by end of this July. Therefore, speculations are rife than BTI might consider increasing its stake in Reynolds.
However, Reynolds CEO Cameron recently downplayed talks that her company is in a tie-up discussion with BTI. Equally controversial are the speculations of a possible acquisition of Lorillard. It first emerged that Reynolds was seeking to join forces with Lorillard and then speculations pointed to Lorillard as being among the potential targets of British American Tobacco PLC (ADR) (NYSEMKT:BTI) as the company seeks a cigarette deal in the U.S.
BTI enlists financial adviser
As if to give credence to the speculations about a possible U.S. merger or takeover deal, reports circulating in the market last week suggested that British American Tobacco PLC (ADR) (NYSEMKT:BTI) hired Deutsche Bank to explore the various options for U.S. deals. The deals include the acquisition of Reynolds and Lorillard and financing opportunities for the same.
