NEW YORK -- Loews Corp.'s board has approved a plan to spin off its entire ownership interest in cigarette maker Lorillard Inc. to holders of its Carolina Group stock and Loews common stock in a tax-free transaction. As a result of the transaction, Lorillard, presently a wholly owned subsidiary of Loews, will become a separate publicly traded company.
The spinoff is expected to be completed in mid-2008.
Loews will effect a redemption of all of the outstanding Carolina Group stock in exchange for shares of common stock of Lorillard, [image-nocss] in accordance with the terms of the Carolina Group stock contained in the Restated Certificate of Incorporation of Loews. Holders of Carolina Group stock will receive one share of common stock of Lorillard for each share of Carolina Group stock they own. The Lorillard shares distributed in the redemption of the Carolina Group stock will constitute approximately 62% of Lorillard's outstanding common stock, which is the percentage of the economic interest in the Carolina Group that is allocated to the outstanding Carolina Group stock.
Loews will dispose of the remaining 38% of Lorillard's outstanding common stock in an exchange offer for shares of outstanding Loews common stock if Loews determines that market conditions are acceptable for an exchange. If Loews determines not to effect the exchange offer or the exchange offer is not fully subscribed, the remaining shares of Lorillard will be distributed as a pro rata dividend to the holders of Loews common stock.
Loews currently has two classes of common stock outstanding: Carolina Group stock, which is intended to reflect the economic performance of a group of assets and liabilities called the Carolina Group, principally consisting of Lorillard and its subsidiaries; and Loews common stock, representing the economic performance of the remaining assets of Loews, including the interest in the Carolina Group not represented by outstanding Carolina Group stock.
Loews expects that Lorillard's common stock will be listed for trading on the New York Stock Exchange.
Following the spinoff, Martin L. Orlowsky will continue to serve as chairman, president and CEO of Lorillard, and Lorillard's corporate headquarters will continue to be in Greensboro, N.C.
Completion of the proposed transaction is subject to a number of conditions including receipt of a favorable ruling from the Internal Revenue Service (IRS) and an opinion of tax counsel as to the tax-free nature of the transaction, Securities & Exchange Commission (SEC) clearance, the absence of any material changes or developments, final approval by the Loews board and market conditions. Approval by shareholders of Loews is not required.
Loews, a holding company, is one of the largest diversified corporations in the United States. Its principal subsidiaries are CNA Financial Corp.; Lorillard Inc.; Boardwalk Pipeline Partners LP; Diamond Offshore Drilling Inc.; HighMount Exploration & Production LLC; Loews Hotels; and Bulova Corp.
Lorillard is engaged, through its subsidiaries, in the production and sale of cigarettes. The principal cigarette brand names of Lorillard are Newport, Kent, True, Maverick and Old Gold. The company said Lorillard's largest-selling brand is Newport, the second largest-selling cigarette brand in the United States and the largest-selling brand in the menthol segment of the U.S. cigarette market.
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