Since the announcment of the merger there has been a lot of tumult -- shareholder suits, huge verdict against RAI in Florida, unceertainty over FTC and shareholder approval, and the continuing uncertainty over the fate of menthol. So it's not unexpected that LO's share price will be volatile, and will likely continue until the dust settles.
Anyone who played this as a short-term get-rich-quick scheme may well get burned -- this is not the type of transaction forthat with multiple players and hurdles to overcome before it's a done deal.
last div paid was June 10, so next ex-div date will be late in August. No reason to think that the regular div will not be declared.
I agree that it will get done, but with four parties involved, and multiple approvals (shareholders and the FTC) needed, the closing process will be quite protracted -- not anytime soon, sorry.
Down less than 1% as of noon (EDT), still above $58/share. Proper reaction given that verdict award will be appealed and greatly reduced if it holds.
Despite the inevitable appeal and likely significant reduction of the over-the-top punitive award (if nothing else there is the relationship of punitive-to-compensitory damages) I'd be intersted in BAT's opinion/stance, given their major stake in RAI and plans to invest further via the LO acquisition.
This is the reason I am a bit surprised that Imperial wants more exposure to U.S. cigs. I realize that it's still the largest market, but the litigation threat/potential is part of the reason PM split is int'l ops out.
Your focus should now be on RAI -- its price will influence the longer term value of your LO holding. Even at $55/share, LO's value in the merger is $66.50/share. Now there is the issue of what you do between now and then -- do you intend to hold onto the 43 RAI shares, sell them, or try to sell the entire 150 shares prior to the merger's close? Capital gains consequences also need to be considered. But depending upon the price at which you bought the LO shares, you should be ok with some patience.
I spoke to Investor Services at Reynolds -- they confirmed that the .2909 factor is fixed. Ignore the earlier posters who mistakenly wrote about floating or fluid ratios -- they are wrong!
Did anyone "guarantee" 68.80? I believe that this amount was cited as the value using RAI shares' price as of a given July date. I think people read the $68.80 without absorbing the details. In any event, with 75% of the value in cash, it would take quite a plummet in RAI share price forthe value to be unattractive relative to where the LO price had been hovering. For example, at $50 (RAI), the deal is worth $65.05 to LO longs -- this still good in my opinion.
OK, gang: once and for all the .2909 factor is FIXED; there is no float, adjustment, or anything more than the various releases stated. I spoke to Investor Relations at Reynolds, and a very helpful person explained that the factor was fixed as per the press releases and other announcements.
What choice do you have without selling at a loss? There's a lot of emotion and uncertainty now; until there are signs that the deal will be approved, especially by the FTC, I believe things will be choppy. Once LO rises above your buy price you can sell and get a smaller profit or wait until the $68 level is reached. Don't forget though that if you hold then once the deal closes and LO doesn't trade part of your consideration (c. 25%) will be in RAI shares.
Sorry to say this was not designed to be a "get rich quick" scheme, and the market is not letting that happen!
If the .2909 factor for the RAI shares is not fixed then a poor explanation of the transaction was done yesterday. I looked all though the materials on the RAI website and saw or heard nothing to the effect of a fluid or floating factor -- only the .2909 itself and the $50.50 cash.
I just read the transcript of the presentation includingthe Q & As. Can you tell me wherein the presentation the "fluid conversion ratio" was introduced. I'm not saying that it doesn't make sense, but I just couldn't find it in any of the remarks by anay ofthe speakers.
You are neglecting the .2909 shares of RAI that is also part of the deal for LO shareholders, along with the $50.50 in cash. So, to use round numbers, if RAI is at $60, the share portion is worth $17.45 ($60 x .2909), bringing the total value to $67.95 ($50.50 + $17.45).
Thr risk now is that the deal won't be approved by the FTC, or the shareholders, although the chance of the later is very small in my opinion given the dominance of institutionals and BAT for RAI. Also, some investors might not want RAI shares, and with about 25% of the value in them it may have less appeal.
Hope this helps...
So it's NOT cooked at 68.8 or at any price. As you say LO shareholders receive .2909 shares of RAI and the cash. So depending upon the price of the RAI shares at the time of closing the exact value is to be determined.
British American Tobacco -- late in 2003 what was R J Reynolds combined assets with the American brands of BAT and formed Reynolds American in which BAT was a 42% shareholder.
There's no guarantee: the deal as a LO shareholder is $50.50/share plus .2909 of RAI shares. So the "value" per LO share is dependent upon the RAI share price at the tme of closing. The $68 cited in the news reports was based upon current prices. Provided RAI stays in the $60 range then the deal is worth $67-68 per share for LO holders.