July 21, 2012 / 1:05 AM / 7 years ago

Exclusive: Republic Tobacco for sale, may get over $2 billion - sources

NEW YORK (Reuters) - Republic Tobacco, a privately held company that makes the Drum brand of loose tobacco in the United States, is seeking a buyer and could fetch more than $2 billion in a potential sale, according to people familiar with the matter.

The Illinois-based maker of tobacco and rolling papers has attracted interest mostly from private equity firms, said the three people, who declined to be identified because the process is not public.

Republic, which could be worth as much as $2.3 billion according to one of the people, is being advised by Credit Suisse Group on the process, they said. Other brands Republic owns include Top tobacco and Job rolling papers.

Republic and Credit Suisse did not have an immediate comment.

The auction, which is in the second round according to the sources, comes at a time when financing for leveraged buyouts is readily available. Private equity-backed acquisitions fell 19 percent to $113.7 billion in the first half of 2012, outperforming some 25 percent decline in overall deal volumes during the same period.

Republic’s major product lines include cigarette tobacco, cigarette papers, filtered tubes, accessories, pipe tobacco and cigars.

Republic is owned by D.R.L. Enterprises, a holding company founded in 1969 by Chicago entrepreneur Donald Levin. D.R.L has businesses in aircraft, medical equipment, machinery leasing, film distribution and licensed sports product manufacturing.

Levin’s film company has made nearly 20 motion pictures distributed in the United States and overseas, featuring such stars as Emilio Estevez, Charlie Sheen, Sharon Stone, Rodney Dangerfield and Chuck Norris.

Tobacco companies are often seen as defensive plays because they are consumer staples, but cigarette smoking is in decline in many developed markets.

As such, tobacco companies like Altria Group Inc, Reynolds American and Lorillard often rely on price increases to drive sales growth.

The market for “roll-your-own” tobacco was worth about $798.8 million in the United States last year, and $18.48 billion worldwide, according to Euromonitor International.

Additional reporting by Michael Erman; Editing by Richard Chang

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