Reynolds-Lorillard: Why Investors Hate the Merger, in 8 Simple Slides

Shares of Lorillard  (NYSE: LO.DL  ) and Reynolds American  (NYSE: RAI  ) both fell sharply Tuesday, with Reynolds stock down 5% and Lorillard stock off 7% as of noon EDT. The plunges came following a formal announcement from both companies that they would merge in a deal worth $27.4 billion. Yet with shareholders of both companies having long expected a merger after months of rumors and reports, you'd be justifiably confused in asking why the two stocks are falling so hard today.

The following slideshow has the answers you need about the Reynolds American-Lorillard merger, going into greater detail about the merger agreement and specifically pointing to some of the deal's more problematic points. Although the merger has some advantages for both companies, it also introduces some big risks, and the surprising divestitures of many of Lorillard's best-known brands to Imperial Tobacco -- including the key blu eCigs line of electronic cigarettes -- were the most shocking part of today's announcement.

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  • Report this Comment On July 15, 2014, at 12:37 PM, PrototypeZ wrote:

    Agree that selling blu to BTI is the worst part of this deal. If anything the e-cigs are one of the last bastions of hope, domestically, for American tobacco companies as their numbers continue to decline. Furthermore, the e-cigs can be players in the future if the whole marijuana legalization tide continues to gain momentum.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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Related Tickers

6/12/2015 4:05 PM
LO.DL $0.00 Down +0.00 +0.00%
Lorillard, Inc. CAPS Rating: ****
RAI $42.21 Up +0.96 +2.33%
Reynolds American,… CAPS Rating: ****