Lorillard Blu Europe E-Cigarette Push Offers Competition for BAT

Lorillard Inc. (LO) plans to sell its Blu electronic cigarettes in continental Europe as early as this year, challenging British American Tobacco Plc (BATS), which is preparing its own expansion and may also be involved in talks to acquire Lorillard.

Lorillard will start selling its e-cigarettes in France, Germany and the Netherlands, Jacob Fuller, Blu’s U.K. chief executive officer, said in an interview yesterday.

“Closer to the end of this year you may see us in another country, if not, then in the first quarter of 2015,” Fuller said. Lorillard “wants to take the brand global and the U.K. is the starting point.” Blu has about 40 percent of the U.S. e-cigarette market, said Fuller, the founder of Skycig, a company Greensboro, North Carolina-based Lorillard bought last year.

Reynolds American Inc. (RAI) and biggest shareholder BAT have explored the purchase of Lorillard for several months and found efforts so far stymied by the complexity of a potential deal, people with knowledge of the matter said. Lorillard climbed to a record high on may 21 on speculation that Reynolds, the maker of Camel cigarettes, will make a bid for it.

BAT last year started selling its e-cigarette, Vype, in the U.K. and said it would expand the offering into other European countries as governments clamp down on smoking. The U.K. plans to require plain tobacco packaging as early as next year, while European lawmakers have increased the size of health warnings on cigarette packs and banned flavored tobacco.

Bid Implications

Fuller said he couldn’t comment on the implications for his plans if BAT backs a bid for Lorillard. A BAT spokesman said he couldn’t immediately comment.

Lorillard bought Skycig in October for about 30 million pounds ($50 million) in cash and a further 30 million pounds to be paid by 2016 if it meets certain financial targets. Fuller said he aims for revenue of about 25 million pounds from the U.K. this year and as much as 100 million pounds by the end of 2015.

Reynolds declined 2.1 percent to $58.53 yesterday in New York, while Lorillard dropped 5 percent to $59.51. BAT shares fell 0.1 percent to 3,538 pence at 8:20 a.m. in London today.

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Kim McLaughlin, Robert Valpuesta

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