FTC recommends lawsuit to block $27bn merger Reynolds American and Lorillard

The Federal Trade Commission has recommended a lawsuit to prevent a proposed $27bn merger between tobacco giants Reynolds American and Lorillard.

US regulators are due to meet on Tuesday on a merger vote, which is understood to be involving the world’s second and third-biggest cigarette makers.

However, according to a source cited by the New York Post, the FTC has called for the deal, which was agreed in July, to be halted.

Lorillard owns the Newport, Kent and true brands and by merging with Reynolds, which controls the Camel, Winston and Pall Mall brands, the newly-formed group would control approximately 45% of the market for smokers under 30 years of age.

As part of the proposed deal, British American Tobacco, which owns a 43% stake in Reynolds, would have to invest $4.7bn to maintain its stake in the group and said in July that it would suspend its £1.5bn share buyback programme with immediate effect.

In July, Reynold said it would sell its Blu, Kool and Salem brands to UK-based Imperial Tobacco, pending approval.

Shares in both British cigarette makers fell following news of FTC’s decision, with BAT losing 1.36% to 3,545.50 while Imperial Tobacco fell 1.60% to 3,019.00p as of 09:21 on Tuesday.