Four agreements for US public company acquisitions with a deal value of $100 million or more were filed this past week.

In the largest deal of the week, on July 15, 2014, Reynolds American Inc. agreed to acquire rival tobacco and e-cigarette company Lorillard, Inc. in a cash-and-stock transaction valued at $27.4 billion, including the assumption of debt.

The deal is likely to face antitrust scrutiny in the already condensed US tobacco industry, as it would create the second largest cigarette company in the US, controlling 42% of the US tobacco market (Altria Group, Inc. would still remain the largest cigarette seller in the US). As such, the parties agreed to make certain divestitures to facilitate antitrust approval, including entering into agreements to sell several brands and a manufacturing plant to The Imperial Tobacco Group (Imperial) for $7.1 billion. If the asset purchase agreement with Imperial is terminated due to a change of recommendation by Imperial's board, Imperial may be obligated to pay a reverse break-up fee of $210 million to Reynolds. Under the Reynolds/Lorillard merger agreement, if Reynolds receives the reverse break-up fee from Imperial and the merger agreement is also terminated, then Reynolds must pay 40% of that fee to Lorillard.

If the Reynolds/Lorillard merger agreement is terminated under certain circumstances, including if Lorillard changes its recommendation or enters into a superior proposal, Lorillard must pay Reynolds a break-up fee of $740 million (2.70% of the total deal value). If the merger agreement is terminated because Reynolds changes its recommendation for the merger, Reynolds must pay Lorillard a reverse break-up fee in the same amount. Additionally, if the merger agreement is terminated under certain circumstances due to the failure to obtain antitrust approval, then Reynolds must reimburse Lorillard for up to $25 million of Lorillard's merger-related expenses. This expense reimbursement, however, will be reduced by any amount of the termination fee received by Reynolds and paid to Lorillard in connection with the termination of the Imperial asset purchase agreement.

Also addressing antitrust concerns, the merger agreement's definition of material adverse effect (MAE) as it relates to both parties includes antitrust and industry-related carve-outs excluding changes resulting from any law, judgment or action enacted, proposed or threatened by the FDA or any other governmental entity that could have the effect of banning or materially restricting the use of menthol in any product sold or distributed by the parties. The agreement also excludes actions required under the merger agreement to obtain antitrust approval from being considered as MAEs.

Furthermore, Reynolds is not obligated to close the merger if there is any legal restraint under applicable antitrust laws that results in any prohibition or limitation on the ownership, control or operation of the businesses of Reynolds or the surviving corporation that would be a "Substantial Detriment" to Reynolds. As defined in the merger agreement, a Substantial Detriment is any such legal restraint that would reasonably be expected to either have an MAE on Reynolds, reduce by $250 million or more the aggregate net benefits of the merger to be received by Reynolds, or have a material adverse effect on any brands or product lines of Reynolds or Lorillard (other than the brands Reynolds intends to sell to Imperial).

In connection with the transaction, Reynolds and British American Tobacco p.l.c. (BAT), Reynolds' largest stockholder, entered into an agreement for BAT to purchase additional shares of Reynolds common stock to maintain its 42% ownership level in Reynolds for $4.7 billion.

Also this week:

For additional public merger agreement summaries, see What's Market.