Cigarette Maker Lorillard Breaks from Loews

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Cigarette Maker Lorillard Breaks from Loews

NEW YORK -- Next week, Lorillard Inc. will follow in the footsteps of its largest competitor, tobacco giant Philip Morris USA (PM USA), by becoming an independent company.

In order to take this step, Lorillard, the third-largest cigarette maker in the U.S., selling brands including Kent and Newport, will break from conglomerate Loews Corp., a transition that will be complete Tuesday.

With U.S. tobacco industry selling fewer cigarettes due to smoking bans and restrictions, the timing of the venture has industry analysts pondering the move, reported Dow Jones Newswire. However, Lorillard dominates the menthol cigarette market, a segment that has been gaining market share and declining more slowly than other types of cigarettes.

"It's going to be a tough market for all the domestic cigarette companies," Morningstar analyst Gregg Warren told the news service. "Lorillard is on the positive end of the industry dynamics because of the menthol offerings."

Warren told the Dow Jones Newswire that PM USA, which has the Marlboro Menthol brand, and R.J. Reynolds Tobacco Co., which has the Kool brand, are aggressively trying to dominate the menthol market. While Lorillard has maintained its leading position, Warren said the company will likely offer attractive discount campaigns that will decrease operating profits.

JPMorgan analyst Erik Bloomquist told Dow Jones Newswire that he estimates the newly independent publicly traded company will have $12.6 billion in market capitalization. Bloomquist said that Lorillard might announce a stock buyback program worth about $1.5 billion or 12 percent of its market capitalization after its separation from Loews; led by the Tisch family who is exiting the tobacco business to pursue growth in other areas.