In an attempt to strengthen its presence in the e-cigarette category, Altria Group Inc.’s (MO - Free Report) subsidiary Nu Mark LLC acquired the e-vapor business of Green Smoke Inc. and its affiliates. Per the deal, Altria paid a cash consideration of $110 million and almost $20 million in incentive payment to Green Smoke.
Green Smoke is a well known developer, manufacturer and marketer of e-cigarettes in the United States, which started its operations in 2009. It sells both rechargeable and disposable versions of e-cigarettes in the United States and Israel under the Green Smoke e-vapor brand.
The acquisition is a strategic fit for Altria’s e-cigarette business. Moreover, the expertise, experience, supply chain, product lines and customer service of Green Smoke are expected to strengthen Altria’s presence in the category. Following the takeover, Altria intends to retain the key management infrastructure of the company.
Altria carrying a Zacks Rank #3 (Hold) forayed into the popular e-cigarette category with the launch of MarkTen e-cigarettes in leading markets of Indiana in August 2013. MarkTen can be used both as a disposable as well as a rechargeable device which is helping the brand gain market share quickly.
E-cigarettes are becoming increasingly popular, especially among youngsters. These battery-powered devices turn a nicotine-based liquid into vapor. These were considered less harmful than traditional tobacco products and, therefore, major tobacco players capitalized on them. Most of the tobacco biggies such as Lorillard Inc.’s Blue E-cig and Reynolds American Inc.’s Vuse also have a strong foothold in the category.
In Nov 2013, Philip Morris International (PM - Free Report) also announced that it would enter the e-cigarette business in late 2015. Moreover, the company announced that it will launch a set of ‘Next Generation Product’ (NGP) in 2015 to attract adult consumers while reducing the risks related to tobacco products.
Altria’s investment in e-cigarettes comes amid growing awareness against tobacco products. ‘The New Tobacco Products Directive’ endorsed by the European Parliament in Feb 2014 received a green signal from the Council of European Union on Mar 14. The new rule states that e-cigarettes, with nicotine strength of more than 20 milligrams per milliliter, would need authorization as a medicine. Furthermore, curative or preventive qualities of these products need to be proved. E-cigarettes below this level will face the same regulations as conventional tobacco products if their usage as a medicinal product cannot be proved.
We now await the Food and Drug Administration’s (FDA) decision on e-cigarettes. The anti-smoking activists have requested the FDA to impose restrictions on e-cigarettes.