A $27.4 billion merger between the No. 2 and No. 3 cigarette companies in the United States might might cut down the number of players on the tobacco industry playing field, but it’s also cause for concern for health advocates.
On Tuesday, the second-largest tobacco company R.J. Reynolds, maker of Camel and Pall Mall, announced it plans to buy Lorillard, the maker of Newport cigarettes, USA Today reports.
The proposed purchase by Reynolds would create a formidable rival for current top cigarette company Altria Group, the maker of Marlboros. Altria currently accounts for 46% of the U.S. cigarette market, while Reynolds has about 25% and Lorillard about 12% of the market.
In an effort to escape some regulatory scrutiny, Reynolds and Lorillard also announced they would sell several of their smaller brands. Imperial Tobacco will pay $7.1 billion to buy Reynolds’ Kool and Salem brands, as well as Lorillard’s blu eCigs brand. The purchase will make Imperial the third-largest cigarette company in the U.S.
Lorillard’s decision to sell blu eCigs comes as a surprise to some analysts who believed that Reynolds was particularly interested in that brand. However, during Tuesday’s announcement officials with Reynolds said the company will stick with its newly launched VUSE product, saying it “offers superior technology and has received very positive early results in its national rollout.”
The proposed deal is expected to give Reynolds over $11 billion in revenue and approximately $5 billion in operating income to invest in innovation, consolidate production, sales and overhead – all of which worry health advocates.
“There’s serious concern that a merged company with increased resources poses a real threat to increased tobacco marketing to America’s kids,” says Matthew Myers, president of the Campaign for Tobacco-Free Kids tells USA Today. “This is a marriage of Joe Camel and Newport — two brands that have played a major role in youth tobacco use.”
The Food and Drug Administration has put emphasis on curbing teen smoking this year with its first ever anti-smoking campaign aimed at teens. The $115 million multimedia education campaign aims to show youth the true costs and health consequences of smoking by focusing on how tobacco affects one’s outward appearance.
Reynolds American buys rival Lorillard for $27B [USA Today]