On last Friday, the British American Tobacco (BAT) Company, famous for its Marlboro, Winston, and Pall Mall cigarettes, made a stunning announcement. For a whopping $47 billion in stock and cash, it would buy a controlling percentage in Big Tobacco’s Reynold American. If all goes according to plan, the merger will create the world’ largest-ever tobacco manufacturer based on market share and estimated revenues.
It would also usher in a new era for BAT. After a nearly twelve-year absence, BAT will once again be selling products to American consumers. But there is another piece to the puzzle that might prove troublesome to the U.S. vaping industry. British American Tobacco and Reynolds American already have a secret deal in place that allows them to share developmental knowledge and future findings in their electronic cigarette research.
What does a BAT merger mean to the American vaping industry?
When the FDA deeming regulations were first announced last May, vape shops and retailers around the country were amazed to learn that they would now be required to undergo a Pre-Market Tobacco Application (PMTA) process for each new product released to market. Each PMTA can cost in upwards of $1 million and take several months to gain approval.
For small business owners that make up the lion’s share of the American vaping industry, this is devastating news. Mom and Pop Shops cannot afford a million dollars every time that they want to release a new blend of e-liquid or a new drip tip. But companies like British American Tobacco can.
Big Tobacco companies make billions of dollars in revenues each and every year, and if BAT has its way, it will be making even more if the merger with Reynolds American is successful. Does BAT want to corner the market on tobacco cigarettes by merging with Reynolds American? Or are they secretly trying to corner the vaping market instead?
Is buying Reynolds American good for vaping?
To the average Wall Street investor, this corporate takeover attempt might seem like just another Big Tobacco Company sucking up another Big Tobacco Company. But to vaping advocacy groups around the nation, many fear that something more ominous is going on. In a letter to the Board of Directors of Reynolds American, Nicandro Durante of BAT made the following statement.
“We have been a shareholder in Reynolds since its creation in 2004 and have benefited from its growth in the U.S. market…The proposed merger of our two great companies is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and next-generation products company.”
“Next-generation products” is shorthand for “vaping products.” Durante goes on to say that the newly combined companies will deliver“a world class pipeline of vapour and tobacco heating products” both in the United States and abroad. Does British American Tobacco want to take over the world tobacco market or the global vaping industry? Unfortunately, they have enough money and political influence on Capitol Hill to do both.