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RAI Prepares Tobaccoville Expansion for Lorillard Merger

WINSTON-SALEM, N.C. — Reynolds American Inc. (RAI) is taking steps to prepare for its merger with Lorillard Inc. even as it waits for the Federal Trade Commission (FTC) to rule on the pending deal. 

According to the Triad Business Journal, RAI's operating company R.J. Reynolds Tobacco Co. (RJRT) is getting ready to add machinery and expand production at its 2-million-square-foot Tobaccoville plant.

A legal notice published on April 6 by the Forsyth County Office of Environmental Assistance and Protection indicates that staff have offered preliminary approval for the project, and will receive public comment on the plans during the next 30 days, the news outlet reported.

R.J. Reynolds' application stated the expansion and changes are necessary for the plant to begin producing Lorillard's Newport brand because Lorillard's cigarettes "differ from current RJRT cigarette products in that the Lorillard cigarettes use alcohol-based flavorings while the current RJRT cigarette products do not."

The application comes soon after executives from Winston-Salem-based RAI and Greensboro-based Lorillard met with the FTC to answer questions on their proposed $27.4-billion merger which was announced in July. 

Under the terms of the pending agreement, Winston-Salem, N.C.-based RAI will buy Greensboro, N.C.-based Lorillard and keep the Newport, True and Old Gold brands. United Kingdom-based British American Tobacco, RAI's largest shareholder, will maintain its 42-percent ownership in RAI through an investment of approximately $4.7 billion.

Once that transaction closes, Imperial Tobacco will pay $7.1 billion for the Winston, Kool and Salem brands from RAI and the Maverick and blu eCig brands from Lorillard.

The sit-down with the FTC occurred two weeks after CSNews Online reported the agency was taking a closer look at Imperial's role in the merger and its ability to compete in the U.S. tobacco scene.

There has been some speculation that the FTC would file a lawsuit to stop the merger. However, according to a Seeking Alpha report Friday morning, RAI ad Lorillard stocks were up on "renewed chatter the FTC will decided against a lawsuit to halt the merger between the two companies."

RAI is holding its first quarter earnings call on April 17 and could provide an update on the deal.


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