Lorillard Grows Global E-Cig Presence

Acquires U.K.-based SKYCIG electronic cigarette business

Lorillard skycig electronic cigarette e-cig

GREENSBORO, N.C. -- Cigarette maker Lorillard Inc. has acquired all of the assets and operations of SKYCIG, a London-based electronic cigarette business, for approximately $48.6 million in cash paid at closing and additional contingent consideration of up to an additional $48.6 million to be paid in 2016 based on the achievement of certain financial performance benchmarks.

The acquisition provides Lorillard with a major U.K. electronic cigarette brand and, along with its major U.S. electronic cigarette brand--blu eCigs--a global presence in the rapidly growing worldwide e-cigarette category.

SKYCIG is expected to benefit from Lorillard's significant sales, marketing, regulatory, research and development expertise to further strengthen its competitive position in the U.K. e-cigarette market.

SKYCIG will operate as a separate operating subsidiary under Lorillard's ownership and it is Lorillard's intention to retain SKYCIG's current management team and its current business locations in Great Britain.

"It has been Lorillard's mission to be first and best in the electronic cigarette category, and with the acquisition of SKYCIG, our mission is now a global one," said Murray Kessler, Lorillard chairman, president and CEO. "We believe that with the addition of SKYCIG, Lorillard is uniquely positioned to lead the global e-cigarette industry to reach its full potential, and to do so in a responsible manner. We firmly believe that e-cigarettes may present the most significant harm reduction option ever made available to smokers in the U.S. and abroad and we look forward to working with regulators around the world to confirm this conclusion."

We are very excited about this development and what it means for both the SKYCIG brand and for our loyal customers," said Tom Rolfe, co-founder of SKYCIG. "We chose to move forward with Lorillard for the exceptional resources and expertise which the company can provide to enable SKYCIG to further both our product innovation and availability. This acquisition will allow us to continue to progress as both the best and the most widely available e-cigarette brand in the U.K."

"We have long believed LO could expand its e-cig business internationally given it was an early believer and entrant into the e-cig category with its April 2012 purchase of blu," said Bonnie Herzog, Wells Fargo Securities LLC's New York-based managing director of beverage, tobacco and convenience store research, in a research note.

Greensboro, N.C.-based Lorillard, through its Lorillard Tobacco Co. subsidiary, is the third largest manufacturer of cigarettes in the United States. Founded in 1760, it is the oldest continuously operating U.S. tobacco company. Newport, Lorillard's flagship premium cigarette brand, is the top-selling menthol and second largest selling cigarette in the United States. In addition to Newport, the Lorillard product line has four additional cigarette brand families marketed under the Kent, True, Maverick and Old Gold brand names. These five brands include 41 different product offerings which vary in price, taste, flavor, length and packaging. Lorillard, through its LOEC Inc. subsidiary, is also a leading U.S. e-cigarette company with its blu eCigs brand.