Tobacco.org

• Swedish Match may spark a bid after Altria move  

Swedish Match, the last independent smokeless tobacco group, may attract a bid from a cigarette maker after Altria's bid for UST is set to make the United States snuff market more competitive.

While cigarette smoking in the mature markets of western Europe and the United States is declining, snuff consumption is rising in the U.S. driven by the perception it is not as harmful as cigarettes, prompting two takeovers in the last two years. . . .

With the two biggest snuff makers in the U.S. market being bought by big tobacco groups, the third -- Swedish Match -- may be next. Some analysts tip the third-largest U.S. cigarette maker Lorillard Inc, which unlike some potential buyers already has a large distribution network in the country, as a front-runner.

"I think that Lorillard could want to buy Swedish Match.

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Altria Group's $10.4B purchase of UST puts spotlight on Lorillard, other acquisition targets  

Observers say Lorillard, which was spun off from Loews Corp. in June, could be next on the list of potential targets.

"It's going to put pressure on everybody else to consolidate," said Sachin Shah, an analyst with iCap Equities. Shah said tobacco leaf producer Universal Corp. and Vector Group Ltd. could also be potential targets.

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• Altria Pursuit of UST Makes Lorillard Next Possible Target  

Altria Group Inc.'s pursuit of snuff maker UST Inc. may mean that Lorillard Inc., the manufacturer of Newport menthol cigarettes, is the next target as the U.S. tobacco industry consolidates.

A UST acquisition might compel Reynolds American Inc., the second-largest U.S. tobacco company, to bid for the Greensboro, North Carolina-based cigarette manufacturer, said Nik Modi, an analyst at UBS Securities LLC, and investor Matthew Kaufler. Lorillard, with a market value of $12.9 billion, climbed 6.4 percent yesterday in New York trading.

Altria, the maker of the top-selling Marlboros, may offer at least $10 billion, or $68 a share, for UST, the producer of top-selling Skoal and Copenhagen snuff, people with knowledge of the talks said. Shrinking sales in the $70 billion U.S. cigarette industry may force companies to combine, while waning legal risk may attract international suitors.

Investors ``are sniffing out the next deal in tobacco,' . . .

Waning legal risk after U.S. tobacco makers prevailed in three multibillion-dollar lawsuits may draw overseas producers to the U.S.

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• Government Gets Hooked on Tobacco Tax Billions 

In HBO’s series “The Wire,” the charismatic thug Omar Little took a bullet to the brain while buying a pack of Newport cigarettes.

If Mr. Little had completed the transaction before falling dead to the grungy floor of a corner grocery, he would have paid 39 cents in federal taxes and a Maryland state tax of $2 per pack.

And those taxes are one reason a ban on menthol cigarettes is unlikely.

Mr. Little’s brand, Newport, is the leading menthol brand and the cigarette of choice among many African-Americans. . . .

The decision to exempt menthol from the flavoring ban may appear illogical until you dissect the economics of cigarettes and their impact on government. A growing reliance by the states and federal government on cigarette taxes — as well as a popular proposal to increase federal taxes by 61 cents to an even $1 per pack to finance the State Children’s Health Insurance Program, S-chip — provide a sort of insurance policy for the continued survival of menthol cigarettes. . . .

Unless menthol smokers switched to other types of cigarettes, a menthol ban would cut nearly a third of the tax revenues for states and federal governments. . . .

Mr. Orlowsky’s vehemence on the subject is not surprising. A ban on menthol could deliver a mortal blow to Lorillard, obviously a problem for its investors and employees, but, not quite so obviously, a problem for state governments.

Lorillard’s share of the tobacco settlement payments to states for last year was nearly $894 million. . . .

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• Lorillard Tobacco Company Issues Letter to the New York Times After Paper Refuses to Share it With Readers 

The Times rejected the letter without a sufficient explanation, reinforcing its unwillingness to present opposing viewpoints to its readers. By doing so, The Times has failed to provide a balanced and fair view of an important issue where an honest review would advance the debate. . . .

Dear Editor:

Your editorial, "Smooth and Dangerous," (August 14, 2008), more appropriately characterizes the concerted effort being undertaken to target the companies that manufacture and market menthol cigarettes. It is simply the latest example of a sophisticated campaign by paternalistic moralists to take away a smoker's choice to smoke menthol cigarettes, or to smoke at all, without regard for the facts or for sound science. It is all the more dangerous because it portends the demise of individual choice.

It comes as no surprise that your paper advocates the regulation of the tobacco industry by the Food and Drug Administration. . . .

The fact is that the science does not support these claims. Bottom line, and in your own words, "The [scientific] evidence [for the harmful effects of menthol] so far is not conclusive." You admit that recent scientific studies "have found no significant difference in the risk of disease for smokers who use mentholated cigarettes and those who don't," yet you nonetheless advocate for a ban on menthol.

Your attack on menthol is nothing more than an opportunity to gain your ultimate end, the prohibition of all tobacco products and the establishment of a tobacco free society. That is the reason you are using the menthol issue to inflame passions along racial divides, and are making accusatory statements without foundation. Whether to impose Prohibition on cigarettes is a debate that we welcome, but it is a debate that needs to be waged on facts and science. It is a debate that should be settled without inflammatory and accusatory rhetoric. Editorials like yours only fan the flames of racism and do not move the cause forward.

The American people deserve to understand that if the anti-tobacco establishment convinces Congress to first ban menthol and eventually outlaw all tobacco, other powerful groups will follow to impose their idea of what is good for us to eat, drink and think. Congress should realize that those who support a ban on menthol and the unworkable regulation of tobacco that is currently being considered are really just looking to further their real agenda, and it won't stop with tobacco.

--Martin L. Orlowsky

Chairman, President & Chief Executive Officer

Lorillard, Inc.

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• Newports: Tobacco CEO Tells "Truth" About Cigarette Ads 

"The truth is that Lorillard markets its Newport brand cigarettes to adult smokers of all ethnicities," writes Lorillard CEO Martin Orlowsky to the Chicago Tribune today. . . .

Lorillard doesn't have to market disproportionately to African-Americans, because the market share of menthols in the black community is already massive. Look at Orlowsky's own math:

The truth is that there are twice as many Caucasian menthol cigarette smokers as there are African-American menthol cigarette smokers.

African-Americans are about 13% of the US population. Whites are about 74%. There are roughly six times more whites than blacks in the US, but only two times more white menthol smokers. Disparity? Duh. . . .

Newport cigarettes contain menthol, which may make them less harsh-tasting and easier for experimenting teens to smoke, Gerlach and colleagues say. They also suggest that expanded advertising campaigns may have helped increase the brand’s popularity.

Nobody has to target underage smokers. Target 18-year-old smokers! Their kid brothers will totally pick it up.

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• LETTER: ORLOWSKY: Defending the marketing of menthol cigarettes  

Your story "Blacks seen as targets of menthol; Exemption for additive troubles many critics" (Page 1, Aug. 13) mischaracterizes the facts regarding the marketing of menthol cigarettes. It is but one more example of a coordinated effort by paternalistic moralists through the media who neither know the facts or the science about menthol in cigarettes nor care to learn them.

This campaign is seeking to take away a smoker's choice to smoke menthol cigarettes, or to smoke at all. It is a blatant effort to impose a politically correct agenda on the American public with the unfortunate assistance of the media. . . .

The truth is that Lorillard markets its Newport brand cigarettes to adult smokers of all ethnicities. The truth is that our marketing is not disproportionately directed to African-Americans. The truth is that we do not target underage smokers. The truth is that there are twice as many Caucasian menthol cigarette smokers as there are African-American menthol cigarette smokers. I challenge those who want to prove otherwise to come forward with evidence to support their charges. . . . .

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Lorillard, Inc. Announces Quarterly Dividend on Common Stock 

Lorillard, Inc. (NYSE: LO) announced today the declaration of a quarterly dividend on its common stock, in the amount of $0.92 per share, payable September 12, 2008 to stockholders of record as of September 2, 2008.

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• Tar Heel Senator Vows to Block Tobacco Regulation Bill 

Sen. Richard M. Burr , R-N.C., has promised to drag out debate, offer amendments, and do whatever he can to ensure “a full and lengthy debate and lengthy amendment process,” should the bill (HR 1108) come to the floor. . . .

In addition to his threats to run out the clock and offer amendments, he was waged a more public campaign to argue that the FDA is not the proper venue for tobacco regulation. Burr has previously argued that cigarette content might more logically be regulated by the Centers for Disease Control and Prevention, and packaging and labeling might be placed under the purview of the Federal Trade Commission. . . .

“You can’t represent North Carolina and say regulation of tobacco is not important,” said Burr, when questioned about the reasons for his opposition to the bill. “I haven’t opposed regulation of tobacco, I’ve just opposed putting it at the FDA,” he added.

Burr said the state’s tobacco industry “is not as dominant a manufacturing base as it once was.” . . .

Neither company has given large donations directly to Burr’s campaign, but have instead sent contributions to his leadership committee, the Next Century Fund. Reynolds’ political action committee gave $10,000 in the current election cycle, and Lorillard $5,000, according to data from CQ MoneyLine.

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As Donors, Lobbyists Often Favor One Party  

One of the biggest lobbyist-donors was Ed Rogers, a Republican insider who worked in the White House for President Ronald Reagan and the first President Bush. He reported giving a total of $59,100, almost all of it to Republicans.

Mr. Rogers said his goal was to "max out" in support of Mr. McCain. He gave $2,300 to the McCain campaign and $37,500 to the McCain Victory Committee, a joint fund-raising effort by the campaign and the Republican National Committee. Mr. Rogers lobbies for diverse clients, including the Lorillard Tobacco Company, Raytheon and the Kurdistan Regional Government.

Senator Maria Cantwell of Washington was the only Democrat who received money from Mr. Rogers. He said Michael Meehan, a member of his firm, "made me give" to Ms. Cantwell.

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Lorillard, Inc. Reports Second Quarter 2008 Results 

"We are pleased to report our first quarter as an independent public company," said Martin Orlowsky, Chairman, President and CEO, Lorillard, Inc. "We look forward to a continuation of our core strategy of balancing profitability and Newport share growth. Our leading position in the menthol segment and our focus on operational excellence will support our on-going commitment to long-term success and enhanced shareholder value. Our recent announcement of a $400 million share repurchase authorization is a demonstration of our interest in furthering shareholder value as part of our overall strategy."

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Lorillard Tobacco Company Voices Disappointment with House Passage of Bill Which Grants the FDA Regulatory Authority Over Tobacco 

The Company also said that while it fully supports reasonable federal regulation of the tobacco industry, that the FDA is already overburdened and is the wrong agency to carry out this enormous task.

The Company also said that it welcomes the provision in this bill that calls for a scientific review of menthol in cigarettes. While the scientific studies to date do not support a conclusion that menthol cigarettes are more hazardous or addictive than non-menthol cigarettes, the Energy and Commerce Committee noted the importance of ensuring the FDA has the "scientific evidence necessary to make the best decision to protect the public health" for all cigarette additives and constituents.

Lorillard agrees that a proper scientific review based on "sound information and scientific evidence and data," as the Energy and Commerce Committee report states, with involvement by all interested parties as required under federal rulemaking procedures, will be informative in addressing the questions that are being raised about menthol cigarettes.

The Company said the current challenges facing FDA are well documented. It believes that the addition of a new multi-billion dollar a year industry for the FDA to oversee, when the agency is already struggling to fulfill its core mission, is misguided. The Company said that it is understandable why 82 percent of those surveyed in a February 2008 Zogby poll say they are concerned that regulating tobacco would interfere with FDA's principal mission to oversee pharmaceutical drugs and the nation's food supply. . . .

The Company believes the FDA is overburdened and the wrong agency to regulate tobacco -- and looks to the Senate for its leadership to find an effective regulatory solution.

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Loews Has $4.96 Billion Profit on Lorillard Split - Off 

Loews Corp <L.N> posted a second-quarter profit of $4.96 billion on Monday, reflecting the split-off of its Lorillard Inc tobacco unit.

Excluding special items, operating profit increased 20 percent to $575 million as improved results at its energy and drilling units offset weaker underwriting and higher catastrophe losses at the commercial insurer CNA Financial Corp <CNA.N>, Loews' largest unit.

Net income at New York-based Loews, a conglomerate run by the billionaire Tisch family, increased from $654 million a year earlier. Revenue rose 12 percent to $3.92 billion.

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UPDATE 2-Lorillard profit falls short of forecast 

Lorillard Inc, the No. 3 U.S. cigarette maker, posted lower-than-expected quarterly profit on Monday, hurt by higher-than-expected excise taxes and expenses from the national tobacco settlement agreement.

However, Lorillard, which separated from conglomerate Loews Corp in June, also continued to gain market share. Shares of the company, whose brands include Newport, Kent, True and Maverick, rose nearly 2 percent.

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• Lorillard has big stake in debate about menthol 

Executives from cigarette-maker Lorillard will keep a close eye on Capitol Hill next week as legislators consider steps that could threaten sales of its lucrative menthol-flavored brand, Newport.

The U.S. House of Representatives could vote before month's end on a bill giving the Food and Drug Administration power to regulate tobacco.

If the bill becomes law, the government would gain new power to restrict ingredients used in cigarettes and crack down on advertising directed at children. Currently, additives found in cigarettes, chew and other tobacco products are not regulated.

Despite wide support for the effort in Congress, debate over whether and how to restrict use of menthol flavoring is threatening to derail the bill. No company has more at stake in the outcome than Lorillard

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