We recently reported on a potential Big Tobacco buyout whereby Reynolds American would buy out Lorillard. While on the surface this seems like an issue that would primarily affect tobacco smokers, vapers who want to stay in the know do need to watch this sale. The offer and negotiations between Reynolds and Lorillard have come a long way as Reynolds offered up $27.4 million for the buyout last week. While a final sale will not likely occur until 2015 due to a need for federal oversight and final negotiations, the deal is on the table.
Vapers will be interested to learn that as a part of the deal Blu e cigs will have a new owner. Reynolds is proposing that they buy every brand that Lorillard owns, including Blu e cigs, and then sell a few lower level tobacco brands as well as the Blu brand to the UK based Imperial Tobacco. Initially it would have made a lot of sense for Reynolds to keep Blu, as Blu has the largest share of the e cig market in the U.S., estimated to be up to 45%. However, it seems that including Blu in the brands that they are willing to unload is being used strategically to avoid as many antitrust arguments from government officials as possible. If this deal becomes reality it will put Reynolds American right next to Altria (the makers of Marlboro among other brands) as the largest Tobacco Company in the United States. If they also owned Blu they would be the biggest player the e cigarette market in the United States as well, which would raise alarms with many federal regulators who will provide oversight before the deal goes through. Other reports indicate that Blu had to be a part of the offer in order to reach a deal with Imperial Tobacco. This makes sense as moving forward Blu is worth more than any of the individual tobacco brands that Imperial Tobacco will be assuming control of via the agreement. As for looking ahead vapor has more than established itself as a force that competes with the tobacco industry making Blu’s inclusion in the deal a must for Imperial Tobacco.
The future of Blu is hard to predict at this point. By no means would Imperial Tobacco want to do anything but grow the brand. Which may mean more innovative, or at least new, products. We can’t be the only ones wondering why Blu hasn’t released a PV yet. Yes, their cig-a-like is among the best available, but vapers’ tastes are changing. Perhaps a new parent company will provide Blu with the push it needs to branch out and prepare for the future of vaping. New ownership always shakes things up, even in huge companies that operate their divisions separately. Blu is accustomed to operating as its own company, with guidance, logistical support, and financial help from parent Lorillard. The European owned Imperial Tobacco will likely treat Blu much the same. They already own a few smaller tobacco brands in the United States, but Blu will represent their first vapor brand on this side of the pond.
Once the deal goes through Reynolds American will immediately begin to compete with Blu. As of now they are reporting that Reynolds current U.S. based e cigarette Vuse will get all of Reynolds Americans’ attention in the United States. They are promoting that the hardware is made right here in the United States and implying that domestic manufacturing allows them to make a “better” and “safer” e cig. A side note, Lorrillard bought up Europe’s SkyCig last October to expand their presence in the European e cig market. The brand has been targeting additional markets throughout Europe ever since. Reynolds American is opting to keep ownership of SkyCig even though they are letting go of Blu.