LO: Removing Lorillard from Investing Ideas

Takeaway: We are removing Lorillard (LO) from Hedgeye's high-conviction stock idea list.

We are removing long Lorillard (LO) from Investing Ideas today. 

 

After Consumer Stables analyst Matt Hedrick added LO on 3/6/14 and months of rumors that it would be taken out, this morning Reynolds American (RAI) announced its intention to buy LO in a cash-and-stock transaction currently valued at $68.88, or a total of $27.4B (including debt). 

 

LO: Removing Lorillard from Investing Ideas - 79

 

The price is significantly below our share target of $80, and it’s worth noting that there is significant runway before the deal is expected to close in 1H 2015. That said, this has been a fantastic position for us. 

 

We want to underline that beyond RAI we do not see another competitive bidder for LO. Further, given that we expect a lengthy regulatory approval process on anti-trust considerations this deal is still a long way from closed and may present a further investment opportunity.

 

Shares are up over 15% from where we added it to Investing Ideas.


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