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R.J. Reynolds Tobacco Holdings Inc. said Tuesday that it will give the Federal Trade Commission until 5 p.m. on June 24 to conclude whether the company’s acquisition of Brown & Williamson Tobacco Corp. violates antitrust law. Reynolds said it acted on the request of the FTC, which needed more time to complete its review. “The companies have agreed they will not complete the transaction prior to that time,” it said in a statement. The previous deadline for FTC action was Friday. The Daily Deal reported Monday that Reynolds had agreed to extend the deadline until late June. A Reynolds spokesman said Monday that the company had nothing new to report on any extension of the June 11 deadline before issuing its release Tuesday. Sources said the deal remains in trouble at the FTC. Staff in the agency’s bureaus of competition and economics have objected to the transaction for months. They contend it would raise the price of branded cigarettes and reduce the availability of generic brands. The merger would give Reynolds and Philip Morris USA Inc. control of more than 80 percent of the market. Odds are slim that the companies could forge a settlement with the government. Reynolds has not offered to divest overlapping brands or pledged to take other steps to open shelf space to generics, sources said. Instead, the company argues that generic cigarettes constitute a viable competitive product that serve to restrict pricing. It also says additional price hikes are not feasible because the tobacco settlement with the states has artificially inflated cigarette prices so much that consumers would switch to generics if the company tried to impose higher prices. Prudential Equity Group LLC issued a research note Tuesday expressing doubts that the merger will close. “We continue to believe the next event for RJR shareholders will be a negative one as the FTC expresses concerns with the proposed merger and that the path to approval under even modified terms may be problematic,” it said. The research firm said Reynolds could try to resolve the FTC objections if the agency sues to block a deal. Yet it also warned that agency concerns surrounding shelf space for generics may not be resolvable. Some investors view any delay as good news for the deal, noting it suggests that senior FTC officials may not share all of the staff’s concerns. They said FTC chief economist Luke Froeb has been questioning his staff about whether the deal is anti-competitive. The companies unveiled the $2.5 billion merger in October. The deal would combine Reynolds with the U.S. operations of British American Tobacco plc. Copyright �2004 TDD, LLC. All rights reserved.

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