Lorillard - essentially a one-product company - Newport cigarettes..

March 23, 2009 - Barron's online (week of March 23, 2009) - One of the most valuable and lucrative, if controversial, consumer products in the world is Newport cigarettes. Newport's manufacturer, Lorillard, essentially is a one-product company. It has a market value of more than $10 billion, roughly equal to that of Heinz (HNZ) or Campbell Soup (CPB). Newport, gives Lorillard 94% of its revenue, 92% of its volumes, 34% share of all menthol cigarette sales in the US, as well as an overall domestic tobacco market share of 10%. Menthol Market Share Comparison..

While smaller than rivals Reynolds American (RAI) and Altria (MO), Greensboro, N.C.-based Lorillard has the highest profit margins in the U.S. cigarette industry. It also has one of the best growth outlooks, thanks to the strength of the Newport menthol brand, which is popular with black and Hispanic smokers, particularly in the Northeast.

Lorillard Inc could be a takeover target, perhaps at a "sizable" premium to its current share price, according to the latest issue of Barron's. Possible Tobacco Mergers/Acquisitions Involving Lorillard.. - March 17, 2009.

There lately has been talk that Reynolds (RAI.N), maker of the Camel (a growth brand - R.J. Reynolds focuses its investment in Camel and Pall Mall to accelerate the brands' market-share growth and to drive the brands for long-term, accelerated growth and profit.), Winston and Kool brands (both are support brands - R.J. Reynolds will put limited marketing support behind these brands and focus on balancing the brands' scale and long-term profit.), might buy Lorillard for a sizable premium above the recent share price of $61," Barron's reports in its March 23 issue. It said Reynolds and Lorillard declined to comment.

Barron's also reports that, "If Lorillard does go on the block, there could a bidding war that includes Reynolds, Britain's Imperial Tobacco, Japan Tobacco and perhaps even Philip Morris International."

The article said that even if Lorillard is not a takeover target, its shares may be undervalued. "Lorillard has the best developed-market tobacco business in the world," David Adelman, the cigarette analyst at Morgan Stanley, was quoted as saying.

Lorillard cannot do what some competitors have done and focus on overseas for growth. In 1977 Lorillard sold the rights for international sales of its cigarette brands to British American Tobacco (BAT). (TobaccoWatch.org)

Reference: Barron's Online (March 23, 2009) Will Lorillard Meet Its Match? Lorillard's thriving Newport cigarette brand makes the company an attractive takeover target. Why Reynolds may be interested, by Andrew Bary, Barron's pgs: 23 and 24, 3/23/2009 Lorillard could be takeover target - Barron's, Reporting by Paul Thomasch; editing by Richard Chang, Reuters, 2/22/2009.