$27B Tobacco Merger Creates Cigarette 'Duopoly'

Reynolds American, the maker of Camel and Pall Mall cigarettes, has agreed to buy Lorillard, the maker of Newport menthols, in a deal that will make it a strong second to Marlboro manufacturer Altria in the US tobacco market, the Wall Street Journal reports. Reynolds will pay a combination of cash and stock amounting to about $27.4 billion. It will also sell off its Kool, Salem, Winston, Maverick, and Blu eCigs brands to Imperial Tobacco Group for $7.1 billion, in the hopes of easing antitrust concerns—though analysts say regulators will be taking a hard look at the deal anyway.

Altria controls about half of the US cigarette market, while Reynolds and Lorillard controlled 25% and 15%, respectively, before the tie-up. "It’s transformative because it creates a duopoly in the US," one analyst tells Bloomberg, which will help dull the pain of a longstanding downward sales trend. The deal also serves to boost Reynolds' presence in tobacco's fastest-growing product categories, menthols and e-cigarettes, the New York Times points out. (More tobacco stories.)