Reynolds/Lorillard Deal May Add 5%-7% to BAT EPS: Morgan Stanley
2014-05-27 07:54:07.110 GMT
By Heather Burke
May 27 (Bloomberg) -- British American Tobacco would boost
its U.S. scale, growth outlook with a possible Reynolds
American/Lorillard deal, Morgan Stanley says.
* BAT may participate in a deal to keep its ~42% stake in RAI
or stay above ~32% holding needed to keep its 5 board seats
* Benefits of RAI/LO deal clear, FDA menthol review a risk,
FTC may fight deal on antitrust or require brand
divestitures
* BAT underlying business strong, increasing U.S. business may
dilute growth, isn’t needed
* Sees BAT having 2015 EPS accretion 5%-7%, assuming RAI uses
50% equity financing to buy LO for $65/shr
* Imperial Tobacco may buy some brands that may have to be
divested, possible purchase of Kool/Salem for 6-8x EV/Ebitda
could be 5-8% accretive to FY15, risk that RJR’s brands ex-
Camel, Pall Mall having >10% vol. declines
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To contact the reporter on this story:
Heather Burke in London at +44-20-7673-2044 or
hburke2@bloomberg.net
To contact the editors responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net
Gaurav Panchal
2014-05-27 07:54:07.110 GMT
By Heather Burke
May 27 (Bloomberg) -- British American Tobacco would boost
its U.S. scale, growth outlook with a possible Reynolds
American/Lorillard deal, Morgan Stanley says.
* BAT may participate in a deal to keep its ~42% stake in RAI
or stay above ~32% holding needed to keep its 5 board seats
* Benefits of RAI/LO deal clear, FDA menthol review a risk,
FTC may fight deal on antitrust or require brand
divestitures
* BAT underlying business strong, increasing U.S. business may
dilute growth, isn’t needed
* Sees BAT having 2015 EPS accretion 5%-7%, assuming RAI uses
50% equity financing to buy LO for $65/shr
* Imperial Tobacco may buy some brands that may have to be
divested, possible purchase of Kool/Salem for 6-8x EV/Ebitda
could be 5-8% accretive to FY15, risk that RJR’s brands ex-
Camel, Pall Mall having >10% vol. declines
For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>
To contact the reporter on this story:
Heather Burke in London at +44-20-7673-2044 or
hburke2@bloomberg.net
To contact the editors responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net
Gaurav Panchal