Reynolds American / Lorillard Acquisition

A Compass Lexecon team including Dennis Carlton, Jon Orszag, Rick Flyer, Colleen Loughlin, Dan Stone, Kirupa Ramaiah, Daniel Garcia-Swartz and Jacqueline Barrett assisted Joe Sims, Craig Waldman, Geoffrey Oliver, Kate Wallace and Ausra Deluard of Jones Day, outside counsel to Reynolds American, Inc. in seeking FTC approval of Reynolds’ proposed acquisition of Lorillard, Inc. The proposed $27 billion transaction included planned divestiture of four brands — Winston, Salem, Kool and Maverick — to Imperial Tobacco Group PLC, with Reynolds obtaining the top-selling menthol brand, Newport. The key concern was whether the divestitures would offset any anticompetitive concerns from the combination of two of the top three cigarette manufacturers in the U.S. The Compass Lexecon team performed extensive economic analyses and econometric modeling of the cigarette industry to provide insight into likely post-merger competitive effects. With these studies, the Compass Lexecon team joined counsel in presenting economic evidence to the FTC in meetings and white paper materials that the transaction was unlikely to cause significant harm to competition. The FTC majority opinion concurred and stated, “We are therefore satisfied that Imperial is positioned to be a sufficiently robust and aggressive competitor against a merged Reynolds-Lorillard and Altria, and to offset the competitive concerns arising from Reynolds’ acquisition of Lorillard.”