Dragonite Sells E-Vapor Business To ITG

From Convenience Store Decisions Staff Report

Acquisition cost totals $75 million.

Dragonite International Limited, and its wholly-own subsidiaries, announced today that it has reached an agreement to  sell its E-Vapor Business for $75 million to Fontem Ventures B.V., a wholly-owned subsidiary of Imperial Tobacco Group plc. (ITG), a global tobacco company with international strength in cigarettes and world leadership in fine cut tobacco, papers and premium cigars.

Fontem Ventures B.V. was established by ITG to develop non-tobacco products, including electronic vapor products. ITG employs approximately 36,000 staff members and sells its products in more than 160 countries around the world.

The $75 million payable for the assets is the aggregate of the Initial Purchase Price of $50 million and the Deferred Purchase Price of $25 million in aggregate.

The sellers include Ruyan Investment (Holdings) Limited, Shenyang; SBT Technology and Development Co. Ltd., Beijing; Ruyan Technology & Development Co. Ltd. and Beijing; SBT Ruyan Technology & Development Co. Ltd, all wholly-owned subsidiaries of Dragonite.

These sellers have agreed to sell:

•  the benefit of the contract

•  the Business Intellectual Property Rights;

•  the Information;

• the benefit of the Claims (including any settlement agreements); and

• all records and other documents relating to the assets

The Business Intellectual Property Rights comprises all of the Intellectual Property Rights owned by the Sellers and used in connection with the business, including but not limited to a wide range of patents and patent applications, registered trade marks and trade mark applications (in each case in a number of different jurisdictions around the world) and registered domain names. The Claims are legal proceedings brought by the Sellers in the U.S. and China for infringement of the group’s patents included in the Business Intellectual Property Rights. The Assets did not form part of the assets included in the Ruyan atomizing cigarettes segment as shown in the Dragonite’s annual report for the year ended Dec. 31, 2012. The assets included in that segment, such as inventory, receivables and advance payments, are not being disposed of and are therefore not included in the sale.

Dragonite had conducted a competitive sale process in which offers for the acquisition of the E-Vapor Business were solicited from several different potential purchasers.

Dragonite International Limited was formerly known as “Ruyan Group (Holdings) Limited.” Prior to consolidation of the company under the Ruyan banner in 2007, the company was operating as a health care and pharmaceutical products company known as the Golden Dragon Group. The electronic cigarette business, including the SBT (“Substitute for Tobacco”) group, which had been operating as an affiliate of Golden Dragon, was then consolidated into the listed company and the name was changed to “Ruyan Group (Holdings) Limited” in November 2007 with three major business divisions: health care, pharmaceutical and electronic cigarettes.

10 comments ↓

#1 Candy Girl on 08.21.13 at 2:40 PM

It will be interesting to see how this impacts the US patent litigation begun by Dragonite against a number of US e-cig companies including Lorillard’s Blu, NJOY, V2, FIN and Metro. I can’t imagine that ITG would agree to a price without determining that the suits (and the patents) had some merit. It’s not like ITG is purchasing a brand, a factory or a distribution network. What they’re really purchasing, it seems, are patents and the plaintiffs position in ongoing litigation. Tobacco companies cross-license all the time so Lorillard, Reynolds and Altria may have a leg up going forward! But only if the US patents in this portfolio withstand the current re-examination of these patents by the USPTO.

#2 Vapor Vixen on 08.21.13 at 3:13 PM

Not a surprise to see this happen
will be interesting to see how it works out

#3 asd@asd.com on 08.21.13 at 5:44 PM

Due diligence yes but realize everybody else passed on this deal first — Fontem/Imperial under considerable pressure to show traction with a deal — I think this will turn out to be a goose egg for imperial.

#4 Candy Girl on 08.22.13 at 8:26 AM

If this deal closes Imperial will be at the US and international e-cigarette nexus, determining how the patent infringement litigation plays out. Significant US e-cigarette companies are already struggling with the ongoing costs and distractions that the litigation has caused. Imperial has a well-earned reputation for vigilantly protecting its patents and trademarks. Others might have passed, but Imperial has the experience and expertise to manage and monetize the IP assets that are at the heart of this transaction.

#5 asd@asd.com on 08.22.13 at 9:49 AM

Candy Girl writes: “Imperial has a well-earned reputation for vigilantly protecting its patents and trademarks.”

I would challenge you to cite examples of Imperial’s expertise in defending and enforcing patents.

I am sure you’d find lots of examples in connection with trademarks — patents however are a very distinct domain from trademarks.

Mind you — I think Imperial is a great company — just I don’t think Imperial has a track record in patent enforcement as you suggest.

#6 Vapor Vixen on 09.09.13 at 5:24 PM

well just heard that Imperial will be introducing an e-cig soon in the US – here they come !

#7 Ross on 10.14.13 at 10:40 AM

I agree with Candy Girl. As a company that was sued by Ruyan through the UK Corporate office we had to pony up some money as well. The UK Corp was purchased by BAT and left us out of the loop; leaving us, the US side, hanging out to dry. We developed our own brand so it is all good. Ruyan is selling there intellectual property in my opinion. When was the last time any has seen their products? Ruyan just wants out and did it in a small way. The law suits could be a problem so I would think that Imperial has that handled.

#8 Anonymous on 10.29.13 at 8:43 PM

The deal is complete as of last week I heard. Will be interesting.

#9 Observer on 11.13.13 at 12:18 PM

any news on their activity

#10 Candy Girl on 11.13.13 at 12:24 PM

Gary Douglas, the guy who headed up the IP areas for Dragonite has moved to the Imperial subsidiary, Fontem Ventures, who was the acquirer of the IP, in the role of “Intellectual Property, Licensing.” I expect that Fontem will be actively reaching out to the large players in e-cigarettes to seek certain financial accommodations.

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