Shareholders approve Reynolds' acquisition of Lorillard

(Adds Imperial vote result, details; updates shares)

By Yashaswini Swamynathan and Sruthi Ramakrishnan

Jan 28 (Reuters) - Camel cigarettes maker Reynolds American (NYSE: RAI - news) Inc's shareholders approved its $25 billion acquisition of Newport (NasdaqGS: NEWP - news) menthol cigarette maker Lorillard Inc (NYSE: LO - news) , a deal that would combine the No.2 and No.3 U.S. cigarette companies.

The deal, announced in July, has attracted intense antitrust scrutiny as a successful merger would result in a market 90 percent dominated by just two companies.

The combined company would control about 40 percent of the U.S. cigarettes market. Marlboro maker Altria Group Inc (NYSE: MO - news) leads the market with a 49 percent share.

Lorillard's shareholders also approved the deal, with about 80 percent of outstanding shares voted in favor.

Reynolds shares rose as much 2 percent to a record high in early trading, while Lorillard shares rose about 1 percent.

Reynolds said in November that it expected the Federal Trade Commission to announce its decision in late January or early February.

The company said on Wednesday that about 451 million of its outstanding shares were voted in favor of the proposal to issue stock to Lorillard shareholders for the acquisition. (http://bit.ly/1ywZI15)

More than 451 million shares of Reynolds were voted in favor of issuing stock to British American Tobacco Plc (LSE: BATS.L - news) , its largest shareholder with a 42 percent stake.

The number of shares voted in favor of the two proposals separately represent about 85 percent of Reynolds' outstanding shares as of Oct. 6. Both the proposals had to be approved by Reynolds' shareholders to complete the merger.

British American said in July that it supported the deal.

Reynolds said last year that it would sell Lorillard's leading e-cigarette blu and four other brands to Imperial Tobacco Group Plc, to allay antitrust concerns.

Reynolds and Lorillard argue that their merger and the Imperial deal would create two strong competitors for Altria.

Imperial said that nearly all of its shares were voted in favor of the deal with Reynolds.

Reynolds offered to buy Lorillard for $68.88 per share in cash and stock. Lorillard shareholders would receive $50.50 in cash and 0.2909 Reynolds share for each share held.

The deal is valued at $27.4 billion, including debt.

Proxy advisory firms Glass Lewis and Institutional Shareholder Services recommended this month that Reynolds' shareholders vote for the deal.

Reynolds shares were up 1 percent at $70.23 in noon trading on the New York Stock Exchange, while Lorillard shares were little changed at $66.20. (Additional reporting by Jilian Mincer in New York; Editing by Joyjeet Das and Kirti Pandey)