The Associated Press
CHARLOTTE, N.C. - R.J. Reynolds Tobacco Holdings Inc., the nation's second-largest tobacco company, and smaller rival Brown & Williamson Tobacco Corp. of Louisville have held talks about merging their U.S. operations, a newspaper reported Wednesday.
The discussions have occurred in fits and starts for some time and a deal appears far from imminent, the Wall Street Journal reported, quoting people familiar with the talks.
R.J. Reynolds, based in Winston-Salem, makes Camel and Winston cigarettes. Brown & Williamson is the third-biggest U.S. cigarette company with brands such as Lucky Strike, Pall Mall and Kent.
They are distant rivals to Altria Group's Philip Morris, which makes top-selling Marlboro cigarettes as well as Virginia Slims, Benson & Hedges and Basic.
The newspaper said that under one scenario, RJR would acquire Brown & Williamson in a stock transaction that would make Brown & Williamson's London-based parent, British American Tobacco Plc, a major shareholder in RJR.
"As a matter of policy, we do not comment on speculation," RJR spokesman Seth Moskowitz said Wednesday.
BAT spokesman Dave Betteridge said, "It is no secret that we are looking for acquisitions, but what we have never done is to discuss any individual company."
Even if there were no deal, the discussions highlight the dire situation facing the major American tobacco companies because of higher taxes, settlement payments to state governments for health costs of treating sick smokers and competition from discount brands.
"I have said for almost five years that the big four manufacturers in the U.S. will someday become the big three," said Bonnie Herzog, an analyst at Smith Barney with an "underweight" rating on RJR shares.
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