American Reynolds buys Lorillard

Reynolds American is the second largest tobacco company in the United States. It markets a variety of tobacco products including cigarettes and moist snuff. Its products include Camel, Pall Mall, Kool, Winston, Salem, and Capri. Lorillard is also an American Tobacco company marketing cigarettes under the brand names Newport, Maverick, Kent, True, and Max.

In July 2014, Reynolds American announced it would buy Lorillard Tobacco Company for roughly $25 Billion. Merger between two of the world biggest cigarette maker also include the sale of the top-selling US e-cigarette to Britain’s Imperial Tobacco group. The deal, which gives Reynolds control of Newport Menthol cigarettes, strengthen the combined company’s hand in competing for a shrinking pool of smokers and sets up a three way battle with Marlboro maker Altria Inc. for the e-cigarette market. After this merger, their market share would be 42%, second only to Altria group’s 51%.

Lorillard’s expertise in the electronics cigarette market will be of special interests to Reynolds, which is looking to capitalize on the growing demand for e-cigs in the US and elsewhere. The traditional tobacco industry has been shrinking as more and more people become health conscious and switch to healthier and smokeless electronic cigarettes. Analysts expect the world market for electronic cigarettes to grow 24.2% every year until 2018.

Lorillard had acquired Blu Ecigs, a privately held Charlotte N.C-based company in 2012, and SKYCIG, a UK based e-cig maker, to gain a significant edge in the e-cigs market. Altria group had acquired Green Smoke’s e-vapor business this year, and is preparing a nationwide launch of its MarkTen e-cigs. Philip Morris International Inc, formerly a unit of Altria Group, has also launched its Marlboro e-cig product, which vaporized real tobacco instead of burning it.

Currently, Reynolds’s only presence in the market for e-cigs is through its Vuse brand, which is effectively sold in only two US states. Following the merger, the company will be looking for a more defined foothold in the e-cigs market. Altria is also getting into e-cigarette market with its own subsidiary, NuMark.