The rising popularity of electronic cigarettes and the success
of blu e-Cigs among youth in the U.S. encouraged cigarette maker
) to expand its presence globally in the electronic cigarette
industry. Lorillard signed an agreement on Oct 1 to acquire all
the assets and operations of SKYCIG, a leading premium brand of
electronic cigarettes in the UK.
Per the deal, Lorillard will pay approximately 30 million
pounds in cash at the time of completion of the deal. In
addition, the deal includes a clause to pay an additional 30
million pounds in 2016 on the achievement of certain financial
milestones. Post-acquisition, SKYCIG will become a separate
operating subsidiary of Lorillard and the company will retain its
current management team and business locations in the UK.
Lorillard captured a leading position in the electronic
cigarette industry in the U.S. after it acquired e-cigarette
brand blu e-Cigs in Apr 2012. The SKYCIG acquisition will further
boost Lorillard's sales as the e-cigarette segment is evolving
rapidly. It will also provide this Zacks Rank #2 (Buy) company an
opportunity to expand in the wide UK electronic cigarette market.
On the other hand, SKYCIG is expected to gain from Lorillard's
marketing, regulatory, research and development expertise, which
will help the brand to further strengthen its foothold in the UK
We note that smokers are shifting their preference to
electronic cigarettes due to rising health concerns. Though sales
of electronic cigarettes are on the rise, the maker of Newport
and Maverick brands has been witnessing a decline in traditional
cigarette volumes since the past many quarters. Cigarette volumes
have been impacted by a slowdown in the tobacco industry,
increasing health consciousness among consumers and significantly
higher prices of cigarettes. Moreover, the industry deals with
increased regulation on packaging (graphic warning labels) in
some international markets and heightened Food and Drug
Administration (FDA) concerns about the effect of menthol and
The company has been making constant efforts to revive
volumes. The company has plans to expand Newport cigarettes in
the under penetrated markets of the U.S. and is also keen
on offering new products and discounts.
Consumer goods stocks that warrant a look are
Pinnacle Foods Inc
Green Mountain Coffee Roasters Inc
Omega Protein Corp
), all of them holding a Zacks Rank #1 (Strong Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
LORILLARD CO (LO): Free Stock Analysis Report
OMEGA PROTEIN (OME): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
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