Just as a bill attempting to raise the legal age to purchase tobacco products from 18 to 21 years is introduced on the federal level [read more here], a similar bill is now being considered in the state of Texas.
On April 9, 2019, Senate Bill 21 passed Texas’ Senate in a 20-11 vote. The bill was introduced by Sen. Joan Huffman (R-Houston) and had the support of one Democrat, State Sen. John Whitmire, also from Houston. Republicans at first opposed the bill, criticizing the age increase because it conflicted with those who were serving in the military who would want to use tobacco products. With the enlistment age being 18, the bill in its original presentation would have barred young adults from being able to legally purchase these products. Sen. Huffman amended the bill to include the military exemption, allowing for Texans who are 18 years and older that serve in the armed forces to purchase tobacco products if they have a valid military ID. Previously, there was a bill in the lower chamber that passed out of a Texas House committee that did not include the military exemption.
Texas’ Lt. Governor Dan Patrick has named Senate Bill 21 as one of his priorities this session and that he believes this bill will save lives and improve public health. A coalition of organizations with a goal of raising the tobacco purchasing legal age to 21 known as Texas 21 opposes the military exemption. Claudio Rodas, a regional director of Campaign for Tobacco-Free Kids, noted that the organization does not support the military exemption and that they will work with legislators to understand why the exemption should be opposed by all.
The bill is now assigned to the House Committee on Public Health. You can express your opposition to the bill by using the International Premium Cigar & Pipe Retailers Association’s (IPCPR) website by clicking here.
Looking for thoughts and discussion. This is controversial.
Eleven senators are demanding answers from popular e-cigarette manufacturer JUUL Labs as the ongoing youth “epidemic” surrounding the popular vaping device continues to be a focus on Capitol Hill. The senators sent a letter addressed to Kevin Burns, CEO of JUUL Labs, Inc., on April 8, 2019, questioning the company’s marketing practices as well as its relationship to big tobacco company, Altria Group, Inc. In the last quarter of 2018, Altria Group, Inc. made a sizable investment in JUUL labs [read more here], a move that’s only brought more scrutiny to the company as e-cigarettes and flavored tobacco products have become the focus of much of the U.S. Food and Drug Administration’s policy in the past year.
“Nearly one year a go, many of us wrote you urging that your company immediately take action to reduce youth use of the dangerous and addictive JUUL vaping device. One year later, JUUL is more popular than ever with children and your company has decided to team up with Big Tobacco giant Altria–the maker of Marlboro cigarettes, the most popular cigarette among children in the United States–in a partnership that the American Heart Association has called ‘a match made in tobacco heaven’,” the senators wrote in their letter to Burns. “While JUUL has promised to address youth vaping through its modest voluntary efforts, by accepting $12.8 billion from Altria–a tobacco giant with such a disturbing record of deceptive marketing to hook children onto cigarettes–JUUL has lost what little remaining credibility the company had when it claimed to care about the public health.”
The senators go on to demand documents and responses to a list of questions addressing JUUL’s business practices. The senators want JUUL to supply them with a complete list of all of JUUL’s advertising buys, including radio, TV, print and social media; the steps the company has taken to ensure its advertisements have not been seen or heard by people under the age of 21; and whether or not JUUL will take extreme steps to prevent its products from being advertised to youth, including keeping its ads out of convenience stores and not using social media influencers to promote its products. The senators also want to see all of JUUL’s new contracting, purchasing order and financial arrangements with retailers, wholesalers, and distributors for JUUL products since Dec. 19, 2018, when the company announced Altria’s investment.
The senators are also asking whether or not the FDA has issued a pre-market order for any JUUL product, including its 57 flavored products and the company’s contributions to any conservative-leaning and anti-regulation organizations that may have attempted to slow the regulatory efforts impacting tobacco products, including e-cigarettes. The senators issued these questions and have asked JUUL to respond in writing to these and many more questions by April 25, 2019.
Proposal Accepted: RAI & BAT Reach Merger Agreement
$49B deal expected to close in the third quarter.
By Melissa Kress, Convenience Store News
WINSTON-SALEM. N.C. — Three months after a proposal was placed on the table, Reynolds American Inc. (RAI) and British American Tobacco shook hands on a $49-billion deal to join forces.
RAI agreed to be acquired by BAT in a cash and share transaction valued at $59.64 cents per share, which reflects a transaction prices which is a 26.4-percent premium to the RAI stock price on Oct. 20, the day prior to publicly announcing BAT’s initial proposal, explained Susan Cameron, executive chair of the RAI board of trustees, in a call Tuesday morning.
“The transaction committee and RAI’s full board of directors are very pleased to have reached this agreement as a result of their significant discussions and negotiations with BAT over the past few months following that initial proposal,” she said.
The agreement represents a total enterprise value for all of RAI at more than $95 billion and is a 7-percent premium to the original Oct. 20 proposal resulting from BAT’s incremental understanding of RAI’s unique opportunities for growth in the attractive and profitable U.S. tobacco market.
“What we are announcing today is compelling, strategic and serves to create further value. The acquisition of Reynolds American that we agreed to not only represents a significant premium for our shareholders, but also includes the potential for continued future growth through ownership in the combined company,” Cameron said.
This acquisition also increases sale, generates considerable significant cost efficiencies, enhances geographic diversification and significantly strengthens research and development (R&D) capabilities — all of which will result in enhanced growth opportunities for the combined companies, she explained.
It is also expected to benefit adult tobacco consumers across the globe by further supporting Reynolds American’s ongoing to efforts to lead the transformation of the tobacco industry, she added.
“That transformation journey has delivered tremendous progress over the past 12 years beginning with the business combination between R.J. Reynolds and Brown & Williamson in 2004. First as CEO and now as executive chairman, it has been quite a journey for me as well over the period,” Cameron explained.
The deal will make RAI BAT’s largest operating subsidiary.
“This next step for us represents a leap forward in RAI’s transformation journey as the combined company will have a world-class pipeline of next generation products (NGP) along with global scale and the R&D capabilities both companies that will fuel the commercialization of innovative tobacco alternatives,” Cameron said.
CHANGING INDUSTRY
The deal comes at an interesting time for the tobacco industry, which has seen its leading segment fluctuate over the past few years.
“Adult tobacco consumers have really benefited from the improved economy over the past year or two and that impact is starting to stabilize. While cigarettes declined at a slower than historical rate in 2015 and 2016, we are now seeing cigarettes return to their historical annual rate of decline of approximately 2 to 4 percent, and our companies have demonstrated an ability to successfully manage this trend,” explained Debra Crew, RAI president and CEO.
As she explained, moist snuff volumes continue to grow and profit growth in both tobacco segments remains favorable.
In addition, RAI sees opportunity as adult tobacco consumers look for alternative tobacco products and the company is “Investing significantly” in those alternatives, Crew added.
“RAI’s operating companies and their brands are well-positioned for continued industry leadership and sustainable long-term growth across a wide range of future scenarios,” she said.
Crew also explained that “one of the exciting elements of the transaction” is the opportunity created from brining the Newport, Kent, and Pall Mall brands under the same global company.
A LOOK AT THE NUMBERS
Under the terms of the deal, BAT will acquire the 57.8 percent of RAI common stock that it does not currently own for $29.44 per share in cash and a number of BAT American Depositary Shares representing 0.5260 of a BAT ordinary share, currently worth $30.20 per share based on the BAT closing share price as of Jan. 16, and the corresponding Dollar-Sterling exchange rate.
The transaction has been approved by the independent directors of RAI who formed a transaction committee to negotiate with BAT, given BAT’s existing ownership stake and representation on RAI’s board of directors, and by the boards of directors of both companies.
Current RAI shareholders will represent about 19 percent ownership of the combined company, according to Cameron, and more than 40 percent of the profits.
“RAI investors who received the newly issued shares in the combined company will have continued significant exposure to the attractive, growing and profitable U.S. tobacco market and will also gain additional exposure to leading positions in high-growth emerging marketing across South American, Africa, the Middle East and Asia,” said Andrew Gilchrist, chief financial officer and executive vice president.
The developed and emerging market opportunities will be addressed with a portfolio of global brands including Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans.
“We believe there is also meaningful opportunities to share global best practices across both of the organizations, as well as global collaboration and sharing of both companies R&D expertise and talent across the new, enlarged group,” Gilchrist explained. “The new combined company will also possess a global new generation products business with a world-class pipeline of innovative vapor and tobacco heating products with access to the fastest-growing NGP markets.”
According to BAT’s Chief Executive Nicandro Durante, the United Kingdom-based company has been a shareholder in RAI since 2004 and has benefited from the success of its present management team’s strategy, including its 2015 acquisition of Lorillard Inc. — which BAT supported with its own investment.
“BAT has consistently executed a winning strategy and has a proven track record of delivering strong results and returns for its shareholders while successfully investing for future growth,” Durante said. “Our combination with Reynolds will benefit from utilizing the best talent from both organizations. It will create a stronger, global tobacco and NGP business with direct access for our products across the most attractive markets in the world. We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future.”
The transaction is subject to shareholder approval from both companies, as well as regulatory approvals and other customary closing conditions. The transaction is expected to close in the third quarter.
To view RIA’s investor presentation on the transaction, click here.
The two tobacco companies have also created a transaction website to provide details on the merger.
About Melissa KressConvenience Store News Melissa Kress joined EnsembleIQ’s Convenience Store News and Convenience Store News for the Single Store Owner in November 2010. Her primary beats include alcoholic beverages and tobacco. Kress has been a professional journalist since 1995. A graduate of West Virginia University, she began her career in community journalism before moving to business-to-business publishing in 2000, covering commercial real estate.
INDIANAPOLIS (AP) — Republicans who control the Indiana Senate say they want to overhaul a vaping law that sparked an FBI probe.
State Sen. Randy Head of Logansport says he’s sponsoring legislation that will give state government more regulatory control over the production of the liquid used in vaping devices. The devices are used as an alternative to smoking.
The law passed two years ago and amended last year effectively gave seven producers control of the Indiana market, shutting out dozens of other manufacturers that had operated in the state.
That’s because it empowered one company to inspect and certify production facilities. The company, called Mulhaupt’s Inc., only certified a limited number of producers.
The FDA on Jan. 9th published a final rule entitled Clarification of When Products Made or Derived From Tobacco Are Regulated as Drugs, Devices, or Combination Products; Amendments to Regulations Regarding “Intended Uses” to clarify that products made or derived from tobacco will be regulated as drugs, devices or combination products rather than tobacco products if they “are intended to 1) diagnose, cure, mitigate, treat or prevent disease, including use in smoking cessation, or 2) affect the structure or any function of the body in any way that is different from effects related to nicotine that were commonly and legally claimed in the marketing of cigarettes and smokeless tobacco prior to March 21, 2000.”
Law360, New York (January 6, 2017, 4:40 PM EST) — Fontem Ventures BV has reached a settlement with Nu Mark LLC in a fight over electronic cigarette patents, ending an infringement lawsuit as well as challenges that Nu Mark had launched attacking the validity of the patents.
Fontem, a unit of U.K tobacco company Imperial Brands PLC, and Nu Mark filed papers Wednesday in North Carolina federal court to dismiss the lawsuit. The companies have also agreed to resolve cases at the Patent Trial and Appeal Board.
Terms of the agreement were not disclosed in court documents. A spokesman forAltria Group Inc., the parent of Nu Mark, said the company was pleased the issue had been resolved but declined to disclose details of the settlement.
Representatives for Fontem did not immediately respond to a request for comment.
The company sued Nu Mark in the spring of 2016, alleging its MarkTen and GreenSmoke products infringed eight patents. The suit was one of several that Fontem has filed against e-cigarette manufacturers in recent years.
It has also gone after the likes of R.J. Reynolds Vapor Co., maker of the top-selling Vuse; Spark Industries LLC; and Logic Technology Development LLC, among others.
Not long after the suit was filed, Nu Mark challenged each of the patents it was accused of infringing at the PTAB. It requested the board examine the patents in inter partes review, arguing that claims in each were invalid.
While some of Nu Mark’s petitions were still pending, the PTAB had declined to institute review in a handful of those cases, including one last month, when it said Nu Mark’s arguments about parts of a patent being obvious relied on evidence that had already been considered by a patent examiner.
“We are not persuaded that adjudicating a dispute on an already considered issue is an efficient use of the board or party resources,” the board wrote in its Dec. 15decision.
Fontem in November 2013 paid $75 million to acquire e-cigarette technologies from Dragonite International Ltd. Hon Lik, a Chinese pharmacist who founded Dragonite and is widely recognized as being the inventor of the e-cigarette, also joined the company.
In addition to this week’s settlement with Nu Mark, Fontem has reached deals with companies includingNJOY Inc., Vapor Corp. and Electronic Cigarettes International Group Ltd. to end patent litigation. Each of those three publicly announced deals included license agreements.
Fontem and R.J. Reynolds recently told the judge overseeing their case that the companies are working to identify a mediator that they can agree on.
Fontem is represented in the Nu Mark case in district court by Michael J. Wise, Joseph P. Hamilton, Lara J. Dueppen and Courtney M. Prochnow ofPerkins Coie LLP, and Stuart H. Russell and G. Gray Wilson ofWilson Helms LLP.
The e-cigarette manufacturer files for relief under Chapter 11 after its Kings 2.0 fails to perform.
NJOY Inc., the electronic cigarette manufacturer, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code late Friday, Sept. 16, in Delaware.
The failure of NJOY’s Kings 2.0 device was behind the bankruptcy filing, according to Law360, which pointed to court filings in which NJOY President Jeffrey Weiss noted that NJOY sustained significant losses after it rolled out Kings 2.0, which was an updated version of its Kings disposable e-cigarette. Kings 2.0 rolled out near the end of 2013, but the product did not perform as expected.
The Debtor’s case was assigned case no. 16-12076 and is pending before the Honorable Christopher Sontchi in the U.S. Bankruptcy Court for the District of Delaware. The hearing is set for Sept. 20 at 9:30 a.m. EST.
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