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Anti-trust body clears RAI acquisition of Lorillard

| May 27, 2015

Reynolds American (RAI) and Lorillard said yesterday that the US Federal Trade Commission (FTC) had voted to accept a proposed consent agreement, authorizing RAI to close its proposed $27.4 billion acquisition of Lorillard.

The FTC clearance is subject to certain conditions, most of which the companies had previously agreed to as part of the related divestiture transactions announced in July 2014.

In a story for Bloomberg News, Duane Stanford and David McLaughlin said that the approval by the FTC antitrust officials, who voted 3-2 in favor of the agreement, would create a market where two manufacturers produced about nine out of every 10 cigarettes sold.

They said that RAI’s CEO Susan Cameron aimed to ‘carve out $800 million a year in expenses and turn a profit on the deal within the first year’.

In a statement, the FTC said that it had voted to accept for public comment a settlement with RAI to resolve the likely anticompetitive effects of its proposed acquisition of Lorillard. The settlement would allow the acquisition to move forward subject to large divestitures by the parties to Imperial Tobacco Group.

Under the settlement, RAI would buy Lorillard for $27.4 billion and then immediately divest certain assets from RAI and Lorillard to Imperial in a second, $7.1 billion transaction.

At the end of both transactions, RAI would own Lorillard’s Newport brand, while Imperial would own three former RAI brands, Winston, Kool and Salem, as well as Lorillard’s Maverick and e-cigarette Blu brands, and Lorillard’s corporate infrastructure and manufacturing facility.

In a separate press note, the FCTC said that its order required that RAI divested to Imperial the Lorillard manufacturing facilities in Greensboro, North Carolina, and provided Imperial with the opportunity to hire most of the existing Lorillard management, staff, and salesforce. It required also the newly merged Reynolds and Lorillard to provide Imperial with retail shelf space for a short period, and to provide other operational support during the transition. Its order appointed a monitor to oversee the divestiture.

The FTC said in its statement that it believed that RAI’ proposed acquisition of Lorillard was likely to lessen substantially competition on the US market for combustible cigarettes. It concluded, however, that the parties’ proposed post-merger divestitures to Imperial would be effective in restoring competition to the market and that it therefore approved the divestitures as part of a consent order.

There were two dissenting statements; one by FTC commissioner Joshua D. Wright (https://www.ftc.gov/system/files/documents/cases/150526reynoldswrightstatement.pdf) and one by commissioner Julie Brill (https://www.ftc.gov/system/files/documents/cases/150526reynoldsbrillstatement.pdf)

Meanwhile, RAI and Lorillard said in a note posted on RAI’s website that the closing of the acquisition and related transactions remained subject to certain other conditions described in the Joint Proxy Statement/Prospectus dated December 22, 2014. ‘The remaining significant condition to closure of the transaction is approval from the federal district court overseeing United States v. Philip Morris USA Inc., et al,’ it said. ‘This case was brought by the U.S. Department of Justice in 1999 against several tobacco companies, including R.J. Reynolds Tobacco Company, an indirect subsidiary of RAI, and Lorillard Tobacco Company, a subsidiary of Lorillard, Inc.

‘Under the terms of the court’s remedial order entered in 2006, before R.J. Reynolds can transfer cigarette brands to Imperial Tobacco’s ITG Brands, LLC subsidiary, the court must enter an order finding that ITG Brands intends to and is capable of complying with the court’s remedial order in relation to the cigarette brands that ITG Brands is purchasing. The motion is unopposed, the matter has been briefed, and the court held a hearing with all parties on May 19, 2015.

‘The companies have requested that the court rule expeditiously, and they are confident that the acquisition and related transactions will close by the end of June 2015.’

Romania exports cigarettes to North Korea

| May 27, 2015

Romania exported goods worth €90 million (US$98.2 million) to North Korea in 2014, with cigarettes accounting for €83 million (US$90.5 million) of those exports, according to a Romania Insider story relayed by the TMA.

British American Tobacco, Philip Morris International and Japan Tobacco International did not export any cigarettes to North Korea.

But industry observers said that a Chinese-owned cigarette factory in Buzau, which makes cigarettes under the brand names Golden Monkey and Dubliss, could have exported its products to North Korea.

Thailand looks to raise tobacco-buying age to 20

| May 27, 2015

Increasing to 20 the minimum age for buying cigarettes is one of a number of measures contained in a tobacco-control bill endorsed by Thailand’s cabinet on Tuesday, according to a story in The Bangkok Post.

In a move hailed by anti-smoking activists, the cabinet approved in principle legislation that would outlaw also the sale of individual cigarettes.

In addition, the bill would ban manufacturers and importers from sponsoring social activities and models from promoting tobacco products.

Deputy government spokesman Major General Sansern Kaewkumnerd said on Tuesday that the draft bill would be sent to the Council of State to check that it adhered to guidelines issued by the World Health Organization.

If approved, the bill would replace the current tobacco-control and health-protection laws, which have been in effect since 1992.

Attempts to raise the minimum age of cigarette buyers began in 2011 in a move spearheaded by the Public Health Ministry.

Essentra adds dedicated e-cigarette test laboratory

| May 27, 2015

Essentra Scientific Services (ESS) has increased the capacity of its laboratory at Jarrow, UK, with the addition of a new facility dedicated to testing electronic cigarettes.

‘The new laboratory complements Essentra’s full-service e-cigarette offering, and ensures it can continue to respond to the industry’s growing demand for reliable and high quality testing and analysis,’ Essentra said in a press note.

Commenting on the opening of the new facility, the director of scientific development, Mike Taylor, said the investment in the new laboratory reflected Essentra’s commitment to help customers stay at the forefront of industry trends and meet the latest regulatory and product quality requirements.

“Essentra Scientific Services has over five years’ experience in the field of e-cigarette testing and, as demand for these services grows, separating our facilities in order to create a new, purpose-built laboratory specifically for smokeless nicotine devices was the logical next step.”

ESS’ laboratory in Jarrow is said to operate a range of industry leading research and testing equipment, including a gas chromatography machine with a triple detector system. ‘Used exclusively for e-cigarette testing, the machine enables measurement of multiple analytes from a single vaping test,’ the press note said. ‘A thermal conductivity detector measures the sample for water, while a second detector analyses it for propylene glycol and glycerol, and also measures the nicotine level. The third detector uses mass sensitive detection to analyse the sample for diethylene glycol and ethylene glycol, which are compounds that can be present in e-cigarette vapour, but should not be.

‘The scope of Essentra’s UKAS accreditation has recently been extended to include e-liquids, and the new laboratory also offers analysis using a wide variety of puff volumes, frequencies durations profiles as well as catering for flavoured e-cigarettes. Testing for a comprehensive range of compounds can also be carried out, or bespoke methods developed on request.

In addition to its improved e-cigarette testing service, ESS, which is part of Essentra plc’s Filter Products business, has more than 50 years’ experience in the analysis of traditional tobacco products.

Essentra Scientific Services’ new laboratory is dedicated to testing electronic cigarettes.

Essentra Scientific Services’ new laboratory is dedicated to testing electronic cigarettes.

Bangladesh looks to break tobacco tax dependency

| May 26, 2015

The draft of a national tobacco tax policy prepared by Bangladesh’s National Board of Revenue provides for a shift away from ‘dependency on tobacco for internal revenue collection’, according to a story in The Financial Express.

The proposed policy, which includes a time-framed action plan, is said to be aimed at keeping a tight rein on tobacco consumption.

It features also strategies aimed at reducing the illegal trade in tobacco products, the deployment of a health development surcharge and a ban on the sales of ‘bidi or loose cigarettes’.

Recently, Finance Minister A.M.A. Muhith hinted that Bangladesh could introduce cigarette tax changes that were in line with practices used in other countries. According to the country’s tax officials; 54 countries apply specific tax, 37 apply ad valorem, 57 use a mixed-system and 19 have no excise duties on cigarettes.

But Muhith vowed not to be involved in the micromanagement of the price slabs of cigarettes, saying the market should fix its own prices.

Meanwhile, MP Saber Hossain Chowdhury, who is president of the Inter-Parliamentary Union, has suggested doing away with tobacco-product price slabs for the coming financial year.

The government was not getting revenue from the inflated prices of tobacco; so excise duty could be imposed on these “health hazardous items” at a fixed rate, he said.

MEPs concerned over influence of 30,000 lobbyists

| May 26, 2015

Two French MEPs have asked the European Commission whether or not it intends in the future to allow itself to be influenced by pressure groups, including those representing tobacco-industry interests, ‘at the cost of democratic transparency’.

They put the number of lobbyists in Brussels representing all interests at about 30,000.

In a preamble to their question, Sophie Montel and Dominique Bilde said that a recent NGO report by Transparency International had criticised the role of lobbies in the EU and the failure of European institutions to ensure the traceability of political decisions and monitor lobbying activities.

‘Conflicts of interests are apparently arising in connection with moves from the public to the private sector and failure to keep the two separate, thereby encouraging the adoption of financial and other measures likely to favour certain lobbies and revealing the predatory characteristics of the State,’ they said.

‘Given that the number of lobbyists in Brussels in fields such as pharmaceuticals, food, tobacco and alcohol is estimated at around 30 000, does the Commission still intend to allow itself to be influenced by pressure groups at the cost of democratic transparency?’