By Tripp Mickle 

The giant, three-way deal to transform the U.S. tobacco industry goes to a shareholder vote this week, but that's not likely to determine the outcome of the transaction.

Its real test will come when the Federal Trade Commission weighs in, which is expected later this quarter. And the market still has doubts.

Shareholders of Reynolds-American Inc. and Lorillard Inc. will vote on Wednesday. Reynolds Chief Executive Susan Cameron said she is confident shareholders will approve the deal, which combines No. 2 Reynolds and No. 3 Lorillard to create a more formidable rival for Marlboro maker and market leader Altria Group Inc.

"I feel confident investors believe this is a good transaction," Ms. Cameron said. "It's good for the shareholders, and it's good for future returns."

Investors don't share that level of confidence, however. Lorillard on Friday closed at $66.02, nearly 7% below Reynolds' offer price ($70.57). Two analysts say the price differential means the market gives the deal about 60% chance of getting FTC approval.

If the deal is approved, Reynolds would own three of the top four cigarette brands: Camel, Newport and Pall Mall. Its market share would go from 24% to 34%, much closer to Altria, which has the top brand Marlboro and a 47% share.

British American Tobacco PLC, which owns 42% of Reynolds, already agreed to vote in favor of the deal, and Ms. Cameron said she has talked to more than 100 Reynolds investors, who she expects to support it. She also spoke with a host of Lorillard shareholders.

Shareholder of Imperial Tobacco Group TLC, the third party in the transaction, are also expected to approve it because it turns Imperial into the No. 3 player in the U.S., the world's most profitable tobacco market, with a 10% share. Imperial agreed to pay $7 billion for Reynolds' Winston, Salem and Kool brands and Lorillard's Maverick cigarette and Blu e-cigarette brands.

The Imperial part of the deal was designed to satisfy antitrust authorities, but the FTC hasn't said publicly whether it is enough.

The deal is getting more scrutiny than most deals the FTC evaluates. The federal agency asks for additional information from companies in about 4% of mergers annually, according to a 2013 report it produced.

Reynolds and Lorillard executives have argued that Imperial will be a stronger No. 3 player than the one created during industry consolidation in 2004. Brown & Williamson Tobacco Corp. and R.J. Reynolds Tobacco Co. merged to become the No. 2 tobacco company and Lorillard moved up a notice to become the No. 3 player, with about 8% market share. Lorillard's share increased to 14% over the following decade.

Imperial's acquisition of Winston, Salem, Kool and Maverick will give it a 10% market share. But unlike Lorillard's Newport, which is growing, the four brands that Imperial will hold in the U.S. each have been losing market share.

In a letter to shareholders, Imperial said market research shows that Winston, the No. 7 brand in the U.S., with a 2.1% market share, "retains strong brand awareness" and "can be reinvigorated." It plans to invest significantly in the brand.

The deal also would reshape market share among smokers under 30. Currently, Marlboro maker Altria enjoys an estimated 48% share of smokers under 30. If Reynolds adds Newport to its portfolio of Camel brands, its market share under 30 will rise from about 26% to nearly 45%.

The majority of the more than 250 billion cigarettes sold in the U.S. are bought by people between 30- and 60-years old. But most consumers become brand loyal by the age of 30, so most consumers of the future would be divided between two companies. Imperial's share of the under 30 market would be about 5%, according to analysts' estimates.

The FTC is expected to look at the menthol category. Newport is the nation's leading menthol cigarette with an estimated 37% share of the market, Marlboro is No. 2 with 29% and Camel is No. 3 with 12%. Imperial would have Salem and Kool with about 10% combined of the menthol category.

Menthol smokers almost exclusively smoke mentholated cigarettes, so regulators will have to determine if Reynolds position as the No. 1 and No. 3 player in that category would give it pricing advantages.

"That's precisely the stuff they watch out for," said Michael Lavery, an analyst with CLSA Americas LLC, who put the likelihood the FTC approves the deal at about 50%. Wells Fargo, however, puts the likelihood the FTC approves the deal at 80%.

Ms. Cameron, said she is "fascinated" by the spread between Lorillard's current stock price and the deal's closing price. She often gets asked what Reynolds would do if the FTC challenges the deal as it is written.

"People ask me things like, 'Would you sell Camel if they told you to?'" Ms. Cameron said. "I say, 'Never. My company is Camel. I'm keeping Camel.'"

Ms. Cameron said if the deal isn't approved, Reynolds would continue to operate as it currently is. But she remains optimistic the FTC will approve the acquisition in the first half of the year. She added, "When that regulatory approval, which we hope will be granted, comes, I expect people all the sudden to recognize the real value."

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