By Brent Kendall And Tripp Mickle
U.S. antitrust enforcers on Tuesday cleared Reynolds American
Inc. to proceed with its $25 billion acquisition of Lorillard Inc.,
ending months of uncertainty about whether the government would
allow the second- and third largest U.S. cigarette makers to
combine.
Reynolds and Lorillard announced their planned marriage last
July, part of a three-way deal in which the companies agreed to
sell $7.1 billion in cigarette brands and other assets to UK-based
Imperial Tobacco Group PLC. The move was designed to head off
concerns that the merger would hurt competition and lead to higher
prices.
The Federal Trade Commission, which spent nearly a year
scrutinizing the deal, on Tuesday said it was satisfied the
divestitures would restore market competition that would have been
lost through the merger, with Imperial "positioned to be a
sufficiently robust and aggressive competitor" to a combined
Reynolds-Lorillard and industry leader Altria Group Inc.
The deal will reshape and further consolidate the tobacco
industry, with two companies controlling more than 80% of the $100
billion U.S. market.
Altria, owner of top brand Marlboro, leads the pack with an
estimated 47% share. Reynolds, which owns the Camel and Pall Mall
brands, will boost its market share to an estimated 34% by
acquiring Lorillard and its Newport brand, the top-selling menthol
cigarette.
In January, shareholders at Reynolds, Lorillard and Imperial
approved the deals.
The companies didn't immediately respond to requests for
comment.
Reynolds expects to have more than $11 billion in revenue and
about $5 billion in operating income after the acquisition.
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