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Reynolds American and Lorillard Strike a Big Tobacco Deal

By Mark Reeth and Sean O'Reilly - Jul 16, 2014 at 6:00PM

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The No. 2 and 3 U.S. tobacco companies are merging in a $27.4 billion deal. What should investors do about it right now?

The No. 2 and 3 U.S. cigarette companies, Reynolds American (RAI) and Lorillard (LO.DL), announced a $27.4 billion merger on July 15. While the new business, which will keep the Reynolds American name, will still trail tobacco giant Altria (MO 1.18%) by a wide margin in terms of market share, the company should remain very profitable.

Smoking is bad for people, but is it good for business?

In this segment of The Motley Fool's Where the Money Is, consumer-goods editor Mark Reeth and analyst Sean O'Reilly discuss whether the merger will bless investors with large dividends and strong stock gains, and if it was smart for the company to drop blu eCigs during the deal.

Mark Reeth has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Altria Group, Inc. Stock Quote
Altria Group, Inc.
MO
$44.74 (1.18%) $0.52
Reynolds American Inc. Stock Quote
Reynolds American Inc.
RAI
Lorillard, LLC Stock Quote
Lorillard, LLC
LO.DL

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