Transforms of US business


A subsidiary of Imperial Tobacco Group PLC (“Imperial” or the “Company”) has entered into a purchase agreement with Reynolds American Inc. (“Reynolds”) for the acquisition of assets, including a portfolio of US cigarette brands, Winston, Maverick, Kool, Salem and US and international e-cigarette brand blu, plus the national sales force, offices and production facilities currently owned by Lorillard Inc. (“Lorillard”, and together, the “Transaction”).

The assets are to be acquired for a consideration of $7.1bn (£4.2bn) following the proposed acquisition of Lorillard by Reynolds (the “Acquisition”) After adjusting for the present value of the expected tax benefits of c.$1.5bn1, the net acquisition cost of $5.6bn (£3.3bn) implies a multiple of 6.9 times EBITDA.


  • Builds on Imperial’s strategy of investing in Growth Brands and Growth Markets.
  • A major investment in the world’s largest profit pool (excluding China) with structural growth potential underpinned by relative affordability.
  • The enlarged US business will be c.24% of combined2 tobacco net revenues.


  • National distribution and sales force transforms Imperial into a major US competitor with a portfolio including Winston, Maverick, USA Gold, Kool and Salem and total market share of c.10%.
  • Delivers leadership in e-cigarettes with blu to combine with Imperial’s e-vapour know-how and offers international roll-out potential.
  • Clear integration process for US business with Martin Orlowsky, former Chairman, President and CEO of Lorillard, appointed Executive Chairman Designate of the enlarged US business.


  • All debt financed transaction.  Imperial expects to maintain its investment grade credit rating on its debt, underpinned by the strong cash flows from the acquired assets.
  • Cigarette brands will be acquired excluding historic product liabilities which are subject to an indemnity from Reynolds.
  • Financially attractive deal that is expected to offer a return of over 10%, well in excess of Imperial’s cost of capital in its first full year and is expected to be significantly EPS enhancing in the first full year post completion.

Alison Cooper, Chief Executive of Imperial Tobacco, said:

“This is a great opportunity to transform our US business and secure a significant presence in the world’s largest accessible profit pool.  We plan to build a US brand portfolio through national distribution and create a stronger, more competitive business. We intend to internationalise blu, the US leader in e-cigarettes and enhance its growth opportunity with our know-how. We expect opportunities for cost optimisation through integration.  The acquisition of these assets, without historic product liabilities for the cigarette brands, on reasonable terms means that it is expected to offer a return of over 10%, well in excess of our cost of capital in its first full year and is expected to be significantly earnings enhancing in the first full year post completion. The value this will create for shareholders and the strategic transformation of our position in a key growth market, makes this an outstanding opportunity”.

ITG press release