WSJ: FTC Set To Clear Reynolds-Lorillard Deal As Early As Next Week

(RTTNews) - Tobacco companies Reynolds American, Inc. (RAI) and Lorillard, Inc. (LO) are set to receive antitrust clearance for their proposed merger as early as next week following a lengthy ten-month regulatory review, according to a Wall Street Journal report on Thursday.

The deal is expected to be approved by the FTC with conditions attached that are intended to protect market competition.

This despite Reynolds American already agreeing to divest some of the brands, including Winston, Salem and Kool and blu eCigs, in a $7.1 billion deal to London-based Imperial Tobacco Group Plc (IMT.L, ITYBY). However, the details of the planned FTC settlement could not immediately be learned.

Reynolds agreed in mid-July to acquire smaller rival Lorillard and its popular Newport menthol brand in a cash and stock deal valued at $27.4 billion.

The combined company will have a strong, balanced portfolio of iconic brands across key categories with projected revenues of more than $11 billion and about $5 billion in operating income.

The proposed merger of Reynolds American, the second-largest tobacco company in the U.S., and Lorillard, the third-largest, would create a bigger rival to industry leader Altria Group, Inc. (MO), which boasts of a 47 percent share of the U.S. tobacco market. The merged company will hold an estimated 34 percent market share.

The deal would combine Reynolds cigarette brands such as Camel, Pall Mall, Natural American Spirit, Kool, Grizzly smokeless tobacco and VUSE e-cigarettes, with Lorillard's top-selling Newport menthol cigarettes and e-cigarettes.

It would enable Reynolds to gain a commanding position in the fast-growing market for e-cigarettes that represents a growing alternative to traditional cigarettes. Reynolds already makes and markets VUSE e-cigarettes, a highly differentiated vapor product.

Greensboro, North Carolina-based Lorillard, through its other subsidiaries, is also a leading global electronic cigarette company, marketed under the blu eCigs and SKYCIG brands.

The global tobacco market is now seeing the rapid growth of electronic cigarettes and lower sales volumes of traditional cigarettes. The popularity of e-cigarettes have soared in recent times as tobacco products are highly regulated and heavily taxed. Further, cigarette smoking has been forbidden in public places.