RJ Reynolds mulls stake in $20-bn rival Lorillard Inc: Report

US tobacco giant RJ Reynolds, which is 42-per cent owned by yje UK's British American Tobacco, is weighing a bid for rival Lorillard Inc, which has a market cap of nearly $20 billion.

It was unclear if Reynolds, which has hired investment bank Lazard to help in the acquisition, is planning to bid for all of Lorillard, or part of it, the Financial Times yesterday reported, citing people familiar with the situation.

The reporty said if a bid materialises it could be the biggest in the global tobacco industry.for many years.

Founded by Pierre Abraham Lorillard in New York in 1760, Lorillard is the oldest continuously operating tobacco company in the US, and is the third largest manufacturer of cigarettes in the country.

Newport, Lorillard's flagship premium cigarette brand, is the top selling menthol and second-largest selling cigarette in the US, and generates around 80 per cent of the company's annual sales of $5 billion.

The North Carolina-based company's other brands include Kent, True, Maverick and Old Gold brands.

Lorillard made its foray into the electronic cigarette market in 2012 with the acquisition of privately held US-based blu ecigs for $135 million.

A deal would create a stronger competitor to industry leader Altria, and could give RJ Reynolds more than 35 per cent of the North American market, the report said.

North Carolina-based RJ Reynolds, whose brands include Salem, Camel, Pall Mall and Winston cigarettes, is the second-largest tobacco company in the US with annual sales of $8.2 billion.