Big U.S. tobacco deal in works

R ICHMOND, VA. — Camel cigarette maker Reynolds American’s $25-billion US deal to buy Lorillard, makers of the Newport brand, creates a formidable No. 2 tobacco company in the U.S. behind Altria, the maker of Marlboro.

It also creates a powerhouse in menthol cigarettes, which are becoming a bigger part of the business and gives the combined company some breathing room even as people smoke fewer cigarettes every year.

The deal announced Tuesday also creates a new major player in the country’s tobacco market, the U.K.’s Imperial Tobacco, which is buying some of the companies’ other brands including Kool and Winston and instantly becomes the king of e-cigarettes in the U.S. The deal also is a big indication that Reynolds sees electronic cigarettes as a promising side business but not the whole future. To get the acquisition done, Reynolds is ceding a commanding lead in the e-cigarette business by selling off Lorillard’s dominant Blu e-cig brand, highly visible because of its TV commercials featuring Stephen Dorff and Jenny McCarthy, to Imperial.

Reynolds and Lorillard value the deal at about $27 billion including debt.

It is expected to close in the first half of 2015 but will face regulatory scrutiny.

After the deal, the company, which will remain based in Winston-Salem, North Carolina, is projected to have more than $11 billion in revenue.

PAU L SA KU M A / T H E ASS O C I AT E D P R E SS/ F I L E Reynolds American, makers of Camel cigarettes, is planning to buy rival Lorillard Inc. for about $25 billion in a deal to combine two of the nation’s oldest and biggest tobacco companies, the companies announced Tuesday.