Lorillard Can Independently Reward Shareholders

Published on February 2nd, 2012 00:00

Lorillard Tobacco Company doesn’t have to join other tobacco companies in order to reward shareholders. “I think that it would be rather difficult for somebody to join in. Lorillard is able to operate as an independent company and produce colossal value,” said Chief Executive Officer Murray Kessler.

Newport tobacco

The generation of Lorillard from Loews Corporation in 2008 urged speculation by experts that the third-giant U.S. cigarette company may draw takeover proposals amid increasing tobacco demand. Lorillard’s popular menthol Newport brand, is raising sales, thus compelling attention of the U.S. Food and Drug Administration that is currently considering how to control the minty flavoring, according to Thomas Russo, representative of the Gardner Russo & Gardner in Lancaster, Pennsylvania. “We still think that Lorillard remains the main candidate for unification once the issue of the menthol use is resolved,” Ann Gurkin expert at Davenport & Co said.

Possible bidders could include Japan Tobacco Inc., the U.K.’s Imperial Tobacco Group and Reynolds American, the second largest U.S. cigarette producer. “Newport brand allows them commanding brands presence. There is a possibility to expand that brand into non-menthol smokes or smokeless tobacco,” Russo stated. Russo controls more than $4 billion including shares of Philip Morris International, British American Tobacco and Altria Group. According to recent data Lorillard decreased 2.7% to $111.38 at the close in New York.

At the same time Japan Tobacco didn’t want to make any comments on the speculation. Imperial Tobacco declared that it is interested in possible revenue producing acquisition opportunities; however it refused to comment on Lorillard speculation. As about Reynolds Company it also didn’t comment. “Lorillard shareholders will continue receiving two-digit returns,” Kessler stated after shares increased 39% last year. Philip Morris shares grew 34% in 2011, while Reynolds rose 27% and Richmond, Virginia-based Altria acquired 20 %.

Lorillard opposed the cigarette industry trend of decreasing tobacco shipments in the 4Q. The company registered low to simple number volume growth, while Altria and Reynolds shipments dropped.”Volume constancy and pricing power had provided great profits. We have a great number of opportunities for developing and growing after Lorillard launched a non-menthol variant of it famous Newport brand,” said Kessler. In December 2010, Newport brand accounted for approximately 90% of Lorillard’s sales revenue. According to Lorillard representative, the 4Q result will be presented on February, 9.

By Joanna Johnson, Staff Writer. Copyright © 2011 TobaccoPub.com. All rights reserved.

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