R.J. Reynolds, British American Tobacco Formalize Vapor Technology Deal

WINSTON-SALEM, N.C. — R.J. Reynolds Tobacco Co. inked a definitive vapor technology-sharing and licensing agreement with Nicoventures Holdings Limited, a subsidiary of British American Tobacco plc.

The move comes less than three months after the two tobacco companies signed a term sheet providing a framework for collaboration and mutual cross-licensing of vapor product technologies through 2022.

Under the definitive agreement, R.J. Reynolds and Nicoventures will collaborate to develop next-generation vapor products. This collaboration includes a process for joint research and development activities, and cooperation on regulatory, scientific and manufacturing issues related to vapor products. 

"This is a great opportunity for the companies to continue to seek innovation in the vapor category, giving adult tobacco consumers more smoke-free options to consider," said Debra Crew, R.J. Reynolds' president and CEO. 

R.J. Reynolds is an indirect subsidiary of Winston-Salem-based Reynolds American Inc. (RAI). 

According to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, this strategic framework could ultimately have a significant positive financial impact, particularly for RAI, since RAI's licensing arrangement with British American Tobacco allows RAI to participate in the global electronic-cigarette category.

"By joining forces and leveraging each other's strengths, these two companies will likely accelerate the pace of e-cig/vapor/reduced risk products' growth on a global basis and importantly will be able to more successfully engage with regulators both in the United States and internationally," Herzog explained.