On July 15, 2014 Reynolds publically announced its intent to acquire Lorillard as part of a $27.4 billion acquisition. Reynolds was the second largest tobacco company in the US and Lorillard was the third. Lorillard’s Newport was the number 2 brand in the US and the number 1 menthol cigarette based on U.S. market share. A simple joining of the number two and three companies would result in almost 90% of the cigarette market being controlled by two companies (Reynolds & Altria Group) and would have faced significant regulatory hurdles due to anti-trust issues.
In order to placate concerns relative to competition, Reynolds preemptively put a separate Asset Purchase Agreement (APA) in place to sell significant assets to ITG Brands, a subsidiary of Imperial Tobacco, to be executed immediately upon merger approval. The APA specified that Reynolds would sell the Winston, Salem, Kool, Maverick and blu eCigs brands, along with other assets and liabilities, including the existing facilities, certain equipment including all computer systems & technical infrastructure and the 2,900-person workforce to ITG Brands for $7.1 billion.