WASHINGTON -- The Federal Trade Commission (FTC) is asking detailed questions about Imperial Tobacco Group PLC, the third tobacco company scheduled to play a key role in Reynolds American Inc.'s proposed $25-billion acquisition of Lorillard Inc., reported The Wall Street Journal.
Reynolds and Lorillard have sought to head off government antitrust concerns by selling $7.1 billion in cigarette brands and other assets toImperial Tobacco, a U.K.-based global tobacco company that operates in more than 20 markets. The idea behind the divestiture, disclosed in tandem with the merger in July, was to give Imperial a significant U.S. presence that could replace market competition previously provided by Lorillard.
People familiar with the FTC's review of the merger said the commission has been taking a close look at Imperial to evaluate whether the firm can become a significant player in the U.S. market if the merger is approved. The FTC is in the late stages of its review, said the report.
Imperial would be taking over four cigarette brands--Winston, Salem, Kool and Maverick. The British tobacco company spent $1.9 billion to acquire the company Commonwealth Brands and its top-selling USA Gold brand in 2007.
Imperial in December said recent financial performance of these brands has declined slightly since the deal was announced, according to the report.
The FTC's questions have continued since Imperial said on Februsry 26 that it was parting ways with tobacco executive Martin Orlowsky, whom it had tapped to be executive chairman of its expanded U.S. operations, people familiar with the review told the Journal.
An Imperial spokesperson told the newspaper that the departure of Orlowsky, a former Lorillard chief executive with two decades of experience in the tobacco industry, "was a clash of working styles. There was always complete agreement on the working plans" for the U.S. business, he said.
Imperial expects regulatory approval of the deal this spring, the spokesperson added.
Imperial has named David Taylor, Lorillard's CFO, to lead its new U.S. subsidiary if and when the Reynolds-Lorillard merger receives government clearance.
Reynolds, Lorillard and the FTC declined to comment to the Journal.
Click here to view the full Journal report.
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