Lorillard on fire with Reynolds American closing in

|By:, SA News Editor

Lorillard (LO +9.4%) is up sharply on volume 6X normal trading activity after a report that Reynolds American (RAI +5%) will make a bid for the company spurs buying activity.

Financial Times reports that if a deal for the tobacco company is struck it would for a value of over $20B, although some inside sources indicate Reynolds might peel off some of the assets in its bid.

Wells Fargo thinks a fair takeout price for Lorillard as a whole would be much higher than $60.

What to watch: Analysts think an acquisition of Lorillard would allow Reynolds to make a stronger move into the growing e-cigarette market. Reynolds plans to launch Vuse later this year, but Lorillard's Blu brand is already a force.