British American Tobacco Moves Into Growing E-Cig Market

Source from:  Law360 09/23/2015

British American Tobacco PLC said Tuesday it will take over Polish e-cigarette company CHIC Group and announced plans for a vapor technology-sharing agreement with a Reynolds American Inc. subsidiary, as the tobacco company banks on the future of e-cigarettes amid changing consumer preferences.

London-based BAT's acquisition of CHIC and a potential vapor technology and research and development collaboration highlights the tobacco company's plans to double down on the growing e-cigarette space.

"Today, we've announced two significant milestones to enhance our next generation product business globally, further enabling us to meet the demands of today's consumer," Kingsley Wheaton, British American Tobacco managing director, said in a statement.

Snapping up 100 percent of CHIC Group will give BAT access to the company's 800 points of sale in Poland, as well as an e-liquids production facility, a research and development center and popular Polish e-cigarette brands such as VOLISH, P1, Provog, Cottien, LiQueen and Aromativ, according to a statement.

"Acquiring the CHIC Group is strategically significant and makes commercial sense. It provides BAT with scale and market reach through Europe's largest e-cigarette retailing network, as well as important manufacturing and R&D capabilities," Wheaton said in a statement.

Financial terms for the acquisition were not disclosed.

The acquisition of CHIC is subject to approval by Poland's Office of Competition and Consumer Protection.

The deal came the same day that BAT, which is a major Reynolds shareholder, also announced plans for a technology-sharing agreement with Reynolds subsidiary R.J. Reynolds Tobacco Co. The anticipated agreement provides a framework for BAT and R.J. Reynolds to collaborate and cross-license their vapor product technologies through December 2022, according to a statement.

The technology-sharing agreement would also include joint research and development activities as well as cooperation on regulatory, scientific and manufacturing issues that may arise, according to a statement.

The companies are still fine-tuning the agreement, but expect to be done with final negotiations and have a legally binding agreement signed by the end of 2015, according to a statement.

BAT's emphasis on the e-cigarette space comes after Reynolds closed on its $27.4 billion acquisition of rival Lorillard Inc. in June, when a Washington federal judge green lit the divestiture of several of its brands to the U.K.'s Imperial Tobacco Group PLC.

As part of the complex deal, BAT held onto its 42 percent ownership in Reynolds by making a roughly $4.7 billion investment in the company.

BAT is represented in the acquisition of CHIC by Deloitte LLP, Herbert Smith Freehills LLP and WKB Wierciński Kwieciński Baehr Sp.k. Enditem