Lorillard

"He started studying companies that were depression-proof and found that, worldwide, tobacco companies were among the most successful. These included the major companies in the USA, such as RJ Reynolds, Lorillard, American Tobacco and Liggett & Myers. He also studied companies in Spain, Italy, Japan and China. In France, the state monopoly Seita owned famous brands such as Gauloises and Gitanes. Tobacco companies in the United Kingdom included Player, British-American Tobacco and Imperial Tobacco, whose chairman, Lord Winterstoke, head of the Wills family, was the richest man in Britain in 1901 after Cecil John Rhodes, who had made his fortune in South Africa."

"had expected. Lorillard ’s strongest cigarette brand, Kent, which had been a winner in the 1950s, was losing market share to Marlboro and Winston. The company had no framework for developing new prod- ucts, and it nearly destroyed its mainstay menthol brand, Newport, by changing the blend, a move that cost it 20 percent of its volume. The"

"hob Tisch immediately launched a high-speed, hands-on analysis of Lorillard ’s inner workings. Fie toured cigarette factories and ware- houses throughout the South, and combed through the corporate headquarters in New York. Things were worse than the Tisch brothers had expected. Lorillard ’s strongest cigarette brand, Kent, which had been a winner in the 1950s, was losing market share to Marlboro and Winston. The company had no framework for developing new prod- ucts, and it nearly destroyed its mainstay menthol brand, Newport, by changing the blend, a move that cost it 20 percent of its volume. The candy company, Reed, which was earning $1 million a year when Lorillard acquired it, was now losing $1 million. Lorillard wasn’t a bad business; it was a badly run business. Larry was certain it had the po- tential for 10 percent annual profit growth."

"this latest target’s assets. The criticism was understandable. Tisch fre^ quently sought to convert assets into cash, but his purpose wasn’t siim ply to raise cash. The assets earmarked for sale were always those that didn’t yield a decent return and held little potential for doing so in the near future without a costly overhaul. Lorillard was no different. The candy and petTood lines didn’t meet Tisch’s requirements for cash flow. Ultimately, they would go. In time, Loews would come to depend heavily on the cigarette business for much of its earnings."

"The beauty of the deal was that it required not one penny of Loew’s cash to acquire a company three times its size. For each share of Lorib lard, shareholders got a Loew’s $62 principal amount, 25-year subordi- nated debenture paying 6% percent, plus one-quarter of a warrant to buy a Loews’ common share for $110. Analysts’ estimates of the value to Lorillard shareholders ranged between $66 and $75 a share, or a total of $429 million to $487.5 million. Wall Street analysts estimated that Loews’ profit for the fiscal year ended August 31, 1968, rose about 27 percent to $20 million on a 32 percent sales gain to $180 million. Lorillard’s calendar 1967 results showed a relatively slim $31 million of profit on sales of $565 million."

"In Tisch’s view, if a business had no prospect for yielding the mag' nitude of returns he could get in the highly liquid stock and bond markets, then that business should be sold and the cash added to the investment portfolio until something better came along. The Tisches put Lorillard on a crash diet. Besides Bennett, six more top executives left. Their jobs “simply vaporized,” according to one executive, leav- ing behind “a residue of bitterness” that Tisch acknowledged. 1"