Reynolds Confronting Antitrust Concerns Over Lorillard Merger
2015-03-31 21:01:54.201 GMT
By David McLaughlin and Duane D. Stanford
(Bloomberg) -- Reynolds American Inc. is meeting with top
antitrust officials to overcome some regulatory opposition to
its proposed acquisition of rival cigarette maker Lorillard
Inc., according to people familiar with the matter.
Within the Federal Trade Commission, some staff members say
competition will be hurt if Reynolds, the maker of Camel
cigarettes, proceeds with the $25 billion merger, one of the
people said. The tie-up of the No. 2 and No. 3 tobacco companies
would lead to a market where two companies control more than 80
percent of sales.
The companies have proposed selling some brands to Imperial
Tobacco Group Plc to resolve antitrust concerns.
Company representatives are pressing that solution in
meetings this week with the FTC’s commissioners, who have the
final say on whether to sue to block a merger on antitrust
grounds. It’s unclear whether the staff has already made a
recommendation to the commission and whether they want more
divestitures.
“Meetings between the companies and the commissioners
indicate there are unresolved issues with the deal but don’t
necessarily mean agency staff have recommended challenging the
transaction,” said Darren Tucker, an antitrust lawyer at Morgan
Lewis & Bockius LLP who is following the deal but isn’t involved
in the transaction.
Spokesmen for Reynolds, Lorillard, Imperial Tobacco and the
FTC declined to comment.
Bolster Competition
Reynolds has an agreement to sell Kool, Salem, Winston, and
blu eCigs brands to Imperial for $7.1 billion in a move to
increase Imperial’s market share in the U.S. to 10 percent from
2.5 percent.
The tobacco industry has struggled with falling demand
spurred by higher taxes, marketing reductions and aggressive
anti-smoking campaigns after a $206 billion legal settlement
with 46 states in 1998 over health costs.
The purchase of Greensboro, North Carolina-based Lorillard,
would help Reynolds compete with U.S. market leader Altria Group
Inc. Reynolds would gain the Newport menthol line, which is
popular in urban areas.
Reynolds, based in Winston Salem, North Carolina, has
agreed to pay cash and stock valuing Lorillard at $68.88 a
share. British American Tobacco Plc plans to fund $4.7 billion
of the transaction, maintaining a 42 percent stake in Reynolds.
The combined company would account for almost 33 percent of
domestic sales. Together, Reynolds and Altria would sell eight
out of every 10 cigarettes in the country.
For Related News and Information:
Reynolds Buying Lorillard for $25 Billion to Revamp Industry
Reynolds-Lorillard Deal Faces Additional Antitrust Scrutiny
Top Stories: TOP<GO>
Top Legal Stories: TLAW<GO>
Top Washington News: WDC <GO>
To contact the reporters on this story:
David McLaughlin in Washington at +1-202-654-7354 or
dmclaughlin9@bloomberg.net;
Duane D. Stanford in Atlanta at +1-404-507-1307 or
dstanford2@bloomberg.net
To contact the editors responsible for this story:
Sara Forden at +1-202-624-1915 or
sforden@bloomberg.net
Nick Turner
2015-03-31 21:01:54.201 GMT
By David McLaughlin and Duane D. Stanford
(Bloomberg) -- Reynolds American Inc. is meeting with top
antitrust officials to overcome some regulatory opposition to
its proposed acquisition of rival cigarette maker Lorillard
Inc., according to people familiar with the matter.
Within the Federal Trade Commission, some staff members say
competition will be hurt if Reynolds, the maker of Camel
cigarettes, proceeds with the $25 billion merger, one of the
people said. The tie-up of the No. 2 and No. 3 tobacco companies
would lead to a market where two companies control more than 80
percent of sales.
The companies have proposed selling some brands to Imperial
Tobacco Group Plc to resolve antitrust concerns.
Company representatives are pressing that solution in
meetings this week with the FTC’s commissioners, who have the
final say on whether to sue to block a merger on antitrust
grounds. It’s unclear whether the staff has already made a
recommendation to the commission and whether they want more
divestitures.
“Meetings between the companies and the commissioners
indicate there are unresolved issues with the deal but don’t
necessarily mean agency staff have recommended challenging the
transaction,” said Darren Tucker, an antitrust lawyer at Morgan
Lewis & Bockius LLP who is following the deal but isn’t involved
in the transaction.
Spokesmen for Reynolds, Lorillard, Imperial Tobacco and the
FTC declined to comment.
Bolster Competition
Reynolds has an agreement to sell Kool, Salem, Winston, and
blu eCigs brands to Imperial for $7.1 billion in a move to
increase Imperial’s market share in the U.S. to 10 percent from
2.5 percent.
The tobacco industry has struggled with falling demand
spurred by higher taxes, marketing reductions and aggressive
anti-smoking campaigns after a $206 billion legal settlement
with 46 states in 1998 over health costs.
The purchase of Greensboro, North Carolina-based Lorillard,
would help Reynolds compete with U.S. market leader Altria Group
Inc. Reynolds would gain the Newport menthol line, which is
popular in urban areas.
Reynolds, based in Winston Salem, North Carolina, has
agreed to pay cash and stock valuing Lorillard at $68.88 a
share. British American Tobacco Plc plans to fund $4.7 billion
of the transaction, maintaining a 42 percent stake in Reynolds.
The combined company would account for almost 33 percent of
domestic sales. Together, Reynolds and Altria would sell eight
out of every 10 cigarettes in the country.
For Related News and Information:
Reynolds Buying Lorillard for $25 Billion to Revamp Industry
Reynolds-Lorillard Deal Faces Additional Antitrust Scrutiny
Top Stories: TOP<GO>
Top Legal Stories: TLAW<GO>
Top Washington News: WDC <GO>
To contact the reporters on this story:
David McLaughlin in Washington at +1-202-654-7354 or
dmclaughlin9@bloomberg.net;
Duane D. Stanford in Atlanta at +1-404-507-1307 or
dstanford2@bloomberg.net
To contact the editors responsible for this story:
Sara Forden at +1-202-624-1915 or
sforden@bloomberg.net
Nick Turner