By Tripp Mickle 

Reynolds American Inc. on Wednesday won shareholder approval for its $25 billion acquisition of Lorillard Inc.

Shareholders of Reynolds, Lorillard and Imperial Tobacco Group TLC voted in favor of the deal, which still needs regulatory approval. The Federal Trade Commission is expected to weigh in later this quarter.

Investors have expressed skepticism the FTC will approve the deal. Lorillard's stock opened Wednesday at $65.80, about 7% below the deal's closing price. Two analysts said the market gives the deal about a 60% chance of closing.

The complicated, three-way transaction on Wednesday received approval from Reynolds and Lorillard shareholders for Reynolds's $25 billion acquisition of Lorillard. It also received approval from shareholders of Imperial for the $7 billion acquisition of five brands, which Reynolds and Lorillard are selling to satisfy antitrust authorities.

Acquiring the third largest tobacco company, Lorillard, will make Reynolds a more formidable No. 2 to Marlboro maker and market leader Altria Group Inc. Imperial will replace Lorillard as the No. 3 player with a 10% market share.

Reynolds expects to have more than $11 billion in revenue and about $5 billion in operating income after the Lorillard deal. Industry analysts estimate Reynolds market share will increase to 34% from 24%. Altria has an estimated 47% market share.

Reynolds and Lorillard executives are optimistic regulators will approve the deal. They 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 notch to become the No. 3 player, with about 8% market share. Lorillard increased its market share to 14% over the following decade.

Imperial will be taking on Winston, Salem, Kool and Maverick cigarette brands and Blu e-cigarettes. But unlike Lorillard's Newport brand, which is growing, those traditional cigarette brands have been losing market share in the U.S.

The FTC also is expected to look at Reynolds share of the menthol cigarette category. Lorillard's Newport is No. 1 in the category with an estimated 37% share and Camel is No. 3 with 12%. Menthol smokers almost exclusively smoke mentholated cigarettes, so regulators will have to determine if Reynolds's position as the No. 1 and No. 3 player in that category would have pricing advantages.

CLSA puts the likelihood the FTC approves the deal at about 50%. Wells Fargo, however, puts the likelihood the FTC approves the deal at 80%.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

Access Investor Kit for Imperial Tobacco Group Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0004544929

Access Investor Kit for Altria Group, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US02209S1033

Access Investor Kit for Imperial Tobacco Group Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US4531421018

Access Investor Kit for Lorillard, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US5441471019

Access Investor Kit for Reynolds American, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US7617131062

Subscribe to WSJ: http://online.wsj.com?mod=djnwires