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).
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.