Another British acquisition “makes Victory market leader”

Ten Motives 300x180U.S. e-cig supplier Victory Electronic Cigarettes is claiming leadership of the British and wider European markets following its fourth takeover of the year.

Victory is paying $104m (€76m) in cash and stock for Ten Motives, a six-year-old UK firm which produces disposable e-cigs along with rechargeable systems, liquids and tanks under the Ten Motives, Cirro and Smoke Relief brands.

It sells them online and through a range of high-profile retailers including Britain’s biggest supermarket Tesco; its rivals Sainsbury’s and The Co-op; WHSmith Travel outlets at airports, railway stations and motorway services; and One Stop and Spar convenience stores.

As a result of the acquisition, Victory claimed it has “now consolidated a significant market leadership position in the UK and attained overall market share leadership in Europe”.

Ten Motives is the third British e-cig supplier that Victory has bought in 2014, after paying more than $50m (€36m) for VIP in April and $70m (€51m) for Vapestick Group in January. It also this year performed a “merger” with U.S. e-cigarette firm FIN Branding which was effectively another takeover.

With revenues in the first quarter of just $4.1m (€3m), albeit sharply increased from the previous year, Victory – whose stock is traded on the U.S. OTC market – has had to find cash for its shopping spree elsewhere.

So far this year it has issued $26m (€19m) in promissory notes, in part to deal with debts and liabilities of FIN Branding, as well as raising about $50m (€37m) in private funding.

The share/stock split of the Ten Motives deal was not disclosed, but in the case of Vapestick it was around 8% cash.

Said Art Devlin, founder and with Tony Jones co-owner of Ten Motives, which is based in Sandbach near Manchester: “The decision to join the Victory group was one that we considered very seriously amongst a number of options. Ultimately we made the decision to join because of their inclusionary partnership approach and their wealth of resources and capabilities to support our growth.

“We believe that scale and broader sales, marketing, and distribution capabilities will be needed to compete in the industry going forward, and we have witnessed Victory’s track record in doing just that.”

What This Means: In a new industry characterised by a multitude of small players, consolidation was always inevitable, and not only as part of the usual maturation process – it is also one of the few ways available to create e-cig companies and brands substantial enough to take on the vast resources of Big Tobacco.

What is more surprising where Victory is concerned is that the bulk of its acquisition activity has been in the UK. Far from a market leader in the U.S., it may have identified Britain, and Europe in general, as markets where there is still a window to develop a credible business before the tobacco companies arrive with their suitcases full of cash. And it certainly implies that Victory does not believe the European Tobacco Products Directive will do the sector much harm.

– Barnaby Page ECigIntelligence staff

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