Lorillard Inc. (NYSE:LO) In News For FDA Reviews And Mergers

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Dallas, Texas 05/01/2014 (FINANCIALSTRENDS) – The FDA will regulate Electronic Cigarettes

The food and drug administration has decided that it will cover E-cigarettes also. This means that companies like Lorillard Inc. (NYSE: LO) may soon be subject to the same rules as normal cigarettes.

As per the plan by the FDA, the $3 billion tobacco market has no rules and regulations concerning E-cigarettes. As a result, there is no age group restriction, no ban on free samples as well as no warning labels on the product.  Health groups have been in arms against these products. They cite advertisements which entice minors and youth to try these products. They also point to the use of sponsorship of youth based events to double their sales in the last two years.

Mitch Zeller, who heads the FDA’s division for tobacco products, stated that their aim is to introduce a scientific and independent agency which will act like a regulator. A number of different manufacturers welcomed the announcement and stated that they were happy to work with the FDA.

The merger will create a Big Three Player    

There are reports that the merger between LO and Reynolds American, Inc. (NYSE:RAI) will lead to a consolidation in the tobacco industry. Experts predict that RAI may involve another party in its acquisition plans. As per them, this will help them avoid any regulatory issues that may arise from the merger.

Reports indicate that RAI will look to offload brands like Salem, Winston and Kool. These brands constitute a 5% market share and they may be sold to a company which has a 4% share in the tobacco industry. This three way sale will create an environment which will remain competitive. If this proposed merger goes through, then LO could easily hold a 8% share in the market.