black mont blanc pen REYNOLDS BID SEEN FOR ROTHMANS

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Reynolds Industries, the leading tobacco company in the United States and the third largest worldwide, indicated yesterday that it was discussing a possible acquisition of Rothmans International, a British company that is the fourth largest cigarette manufacturer in the world.

Reynolds, the maker of Winston, Salem, Camel and other brands, announced that it was in discussions ”to establish a basis of cooperation” with Rothmans, which is controlled by Anton Rupert, a prominent South African businessman.

If it occurs, the takeover would help realize a long term goal of Reynolds to become a significant force in the overseas tobacco market, the growth of which is substantially outpacing that of the United States.

The overseas sales of Philip Morris last year amounted to 250 billion cigarettes compared with only 83 billion for Reynolds. In the United States, in contrast, Reynolds sold a record 201.9 billion, compared with 191 billion sold by Philip Morris. Rothmans sold 150 billion worldwide, chiefly in Europe. The giant remains the British American Tobacco Company, with headquarters in Britain, which last year sold 475 billion cigarettes worldwide. Talks Called ‘Exploratory’

In a statement released by Reynolds, J. Paul Sticht, its chairman and chief executive, and Mr. Rupert said that ”exploratory talks” were being held that could lead to ”definitive proposals being made” to the boards of both companies. Reynolds refused to elaborate.

The two companies had discussed a joint venture overseas several years ago, but no deal was ever made. However, in a recent interview, Mr. Sticht emphasized that Reynolds expected that overseas sales would account for the main growth of its tobacco business in the future. ”Our international business in cigarettes could match our domestic business in the next 10 years, through both internal growth and acquisition,” he said, noting that tobacco consumption overseas was rising faster than in the United States. He added that ”I’m very much of an internationalist.”

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While the stock of Reynolds rose by only 7/8 of a point to close at 45 7/8 yesterday, tobacco analysts responded favorably to the news. ”It’s one of the best things I’ve seen in a long time,
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” said John Maxwell of Lehman Brothers Kuhn Loeb. The acquisition of Rothmans, if it occurs, ”would fit Reynolds like a glove,” he added.

The shares of Philip Morris rose 7/8 yesterday, to 51 1/4. Twice the Size of Rothmans

A highly diversified company with its principal business in tobacco, Reynolds is approximately twice the size of Rothmans. Rothmans, for the fiscal year ended March 1980, reported a profit of $101.7 million on sales of $5.4 billion.

The principal cigarette brands of Rothmans include Rothmans International, Rothmans King Size, St. Moritz, Peter Stuyvesant and Dunhill. Some 90 percent of the company’s revenue comes from tobacco, while the rest is generated by brewing, luxury consumer products some marketed under the Dunhill name but also including Mont Blanc pens and gas and oil activities.

While Reynolds last year succeeded in reversing the downward trend in its one third share of the domestic market, its overseas tobacco business has been making far more dramatic gains. Tobacco sales overseas were $2.1 billion last year, more than double the figure for 1975. The company has achieved a solid share of the market in Canada, Puerto Rico, Brazil, West Germany and the Netherlands.

However, Reynolds has negligible sales in Britain, where Rothmans has approximately 12 percent of the market. Cooperation with Rothmans ”would substantially improve Reynolds’ business in a number of important markets overseas, especially Britain,” said Jeffrey Weingarten of Goldman, Sachs. Rothmans is also strong in Europe, Canada and Australia. Tobacco 54 Percent of Sales

Before the announcement yesterday, Reynolds had appeared to be concentrating primarily on expanding its non tobacco business. Last year, tobacco accounted for only 54 percent of the company’s sales, compared with 74 percent in 1970. However, it represented 73 percent of the earnings of Reynolds from operations.
black mont blanc pen REYNOLDS BID SEEN FOR ROTHMANS