Tobacco firm Reynolds American Inc. is poised to win U.S. antitrust approval for its $25 billion purchase of Lorillard Inc. as early as next week, according to a person familiar with the matter.
Reynolds, the maker of Camel and Pall Mall cigarettes, is seeking approval from the Federal Trade Commission to buy its tobacco rival. To ensure the industry remains competitive, the company has offered to sell its Blu e-cigarettes and menthol brands, including Kool, to Imperial Tobacco Group Plc. -- conditions that are key to regulators approving the deal.
The merger would allow the company to acquire Lorillard’s Newport menthol cigarette brand, whose popularity in urban areas will help Reynolds Chief Executive Officer Susan Cameron cope with slumping demand. The transaction is expected to help carve out $800 million a year in expenses and turn a profit within the first year. That will give Reynolds more heft as it challenges market leader Altria Group Inc., maker of Marlboro cigarettes.
There won’t be changes to the proposed divestiture package, said the person, who asked not to be identified because the process is confidential. Reynolds originally announced plans to buy Lorillard last July.
Representatives for Reynolds, Lorillard and the FTC declined to comment. The Wall Street Journal earlier reported the FTC’s expected approval.
The U.S. tobacco industry is facing shrinking cigarette volumes -- spurred in part by higher taxes, marketing reductions and aggressive anti-smoking campaigns after a $206 billion legal settlement with 46 states in 1998 over health costs. That has pushed companies to consolidate.
If the merger clears, Reynolds would account for about a third of domestic tobacco sales. Together, Reynolds and Altria would sell roughly eight out of every 10 cigarettes in the country.
Bloomberg News, edited by ESM
