USA business buys up UK electronic cigarette companies

A leading UK electronic cigarette brand run by two British entrepreneurs is being sold to an American rival for $104 million (£62 million).

Art Devlin and Tony Jones are receiving a mixture of cash and shares for Ten Motives, the company that they set up less than six years ago.

Victory Electronics Cigarettes Corporation, who are buying the company, have already taken over two other British e-cig firms in the past six months. Vapestick was sold for $70 million last December followed by rivals VIP in a deal worth more than $50 million.

In February Ten Motives appointed advisor BDO to explore options for the company after they had received a number of different approaches looking at acquiring the company.

Former telecoms Devlin, who had previously worked for Cable and Wireless, originally set up Ten Motives after trying electronic cigarettes himself. When a week had passed without him smoking a normal cigarette he was a convert to vaping and realising the business potential. In partnership with Jones he went on to make Ten Motives a significant UK player in the field and quickly drew the attention of larger foreign based rivals.

Market changes

The three deals by VECC highlight the recent activity in the electronic cigarette market sector, with the big players each trying to add to their portfolios and secure the best positions for further expansion.

Traditional international cigarette producing giants such as British American Tobacco and Imperial Tobacco, who are the two largest British manufacturers, have already launched their own e-cig devices.

In the UK vaping is growing at an incredible rate with current figures suggesting 2.1 million active users, an increase from 700,000 in 2012 according to figures from the anti smoking lobbying group ASH.

The increase seems to be based around current or former smokers, more than half of whom had tried e-cig products.

Health issues

Although the whole issue of vaping continues to draw some concerns from certain quarters, supporters claim that they are a healthier alternative to traditional cigarettes.

The image of traditional cigarettes has taken a battering in recent years and smokers are only too aware of the dangers, not only from tobacco itself but also from the additives found in filter cigarette products.

In battery operated e-cigs, a nicotine infused liquid (which can come in many different flavours) is simply heated up to produce a vapour which is then inhaled. The effect is the same as the ‘hit’ from an old style cigarette but includes none of the more dangerous additives and by products such as tar.

The BBC points out that because vaping is still a relatively new phenomenon nobody really knows what their long-term impact on the health of users will be. Currently they are not officially recognised as an aid to quitting smoking and so are not available on the NHS unlike other aids such as nicotine patches which are provided to smokers who want to quit.

Regulation

At the moment in the UK the e-cig market is not regulated so contents of products can vary. However, the sale of the products will soon come under Government control, with the Medicines and Healthcare Products Regulatory Agency expected to license e-cigarettes as a medicine in the UK from 2016.

This change would bring e-cigs in line with products such as nicotine patches and gum and allow the agency to apply rules around the purity of the nicotine in different brands.

On an European scale, MEPs have rejected calls for a blanket ban on their sale across the EU but it is likely that a compromise deal will be struck imposing strict limits on the amount of nicotine they contain, with individual EU member states being able to introduce a complete national ban if they want to.

President of the Electronic Cigarette Industry Trade Association, Katherine Devlin, has said that her organisation had been asking for changes “for years”.

She pointed out that product labelling made it clear e-cigarettes were not for under-18s and added “It’s high time that it was mandated in law so that it can be robustly enforced.”

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