Big Tobacco may soon get smaller.
The makers of Camel and Newport cigarettes said Friday that they are in talks to combine. A deal between Reynolds American and Lorillard, two of the nation’s oldest and biggest tobacco companies, would create a formidable No. 2 to leader Altria Group, the Richmond-based owner of Philip Morris USA.
The news follows months of speculation about a possible combination. In separate statements, the companies said that no agreement had been reached and that there was no guarantee one would be.
Demand for traditional cigarettes is falling in the face of tax increases, smoking bans, health concerns and social stigma. U.S. cigarette sales fell about 2.6 percent last year, to 285 billion cigarettes, according to market researcher Euromonitor International.
But rising prices and reductions in costs have kept the industry handsomely profitable. The larger scale of a combined Reynolds-Lorillard could make future cost-cutting easier.
Reynolds markets Camel, Pall Mall and Natural American Spirit cigarettes and the Grizzly and Kodiak smokeless tobacco brands. It has about 27 percent of the U.S. retail cigarette market. Reynolds, based in Winston-Salem, N.C., also expanded its Vuse electronic cigarette nationally last month. Reynolds’s profit rose 35 percent, to $1.72 billion, last year on revenue of $8.24 billion, excluding excise taxes.
Greensboro, N.C.-based Lorillard, which was founded before the Revolutionary War and is the oldest continuously operating U.S. tobacco company, has about 15 percent of the retail market. Its flagship Newport brand commands 37.5 percent of the menthol cigarette market.
Lorillard became the first major tobacco company to jump into the e-cigarette market when it acquired the Blu e-cigarette brand in 2012. Blu accounts for almost half of all e-cigarettes sold. Lorillard’s profit rose 8.5 percent, to $1.19 billion, last year on revenue of $4.97 billion, excluding excise taxes.
— Associated Press
● The federal agency that insures company pensions for more than 40 million Americans said its top official is resigning. Joshua Gotbaum, a former investment banker, was appointed by President Obama as director of the Pension Benefit Guaranty Corp. in July 2010. He was the longest-serving head of the agency in its history, the PBGC said. Gotbaum will step down in August, the agency said. No further information was given. Gotbaum said in a letter to the PBGC staff that with three children in college, he had promised his wife he would return to the private sector, according to reports in the Wall Street Journal and other publications.
● The National Highway Traffic Safety Administration said it is investigating steering problems in about 500,000 Ford cars. The probe covers the 2004 to 2007 Crown Victoria, Grand Marquis and Marauder models. The NHTSA said a heat shield in the car can rust and dislodge, cause the steering shaft to jam. The agency has received five complaints about the issue and knows of one reported injury.
● One holdout lead creditor in a dispute over Argentina soveregn debt emerged from five hours of meetings with a court-appointed mediator and said that “Argentina is still refusing to negotiate with its creditors.” Jay Newman, portfolio manager at Elliott Management, told Reuters through a company spokesman that “simply put, we have not seen any indication that Argentina is serious about even beginning a negotiation.” Argentina defaulted on roughly $100 billion in sovereign debt in 2002. The majority of investors who exchanged their defaulted bonds for new issues in 2005 and 2010 got between 25 cents and 29 cents on the dollar. Holdout creditors sued and won a court-ordered judgment of $1.33 billion plus accrued interest.
● Wells Fargo reported a 39 percent drop in mortgage revenue for the second quarter as lending volume dropped. The bank managed to boost earnings and meet analyst estimates through gains from investments in stocks and bonds, among other areas. This is the first quarter since 2009 that Wells Fargo did not report an increase in earnings per share from the preceding quarter. Overall, Wells Fargo earned $5.42 billion, or $1.01 per share, compared with $5.27 billion, or 98 cents per share, a year ago.
— From news services
● On Monday: Citigroup releases earnings.