Reynolds American Inc. plans to buy Niconovum AB..

December 2, 2009 - Reynolds American Inc. (RAI) said today that it plans to buy Niconovum AB — a Swedish company that specializes in products that help people quit smoking — for $44 million ($1=6.82 Swedish kronor). Reynolds is purchasing all outstanding shares of Niconovum, the companies said. They expect the deal to be completed by year's end.

Closely held Niconovum AB, based in Helsingborg, Sweden, makes nicotine-replacement products such as gum, mouth spray and pouches, which it markets in Sweden and Denmark under the "Zonnic" brand.

Reynolds' interest in the Swedish company surfaced November 9 from comments made by David Sweanor, a law professor at the University of Ottawa and a tobacco analyst. Sweanor's estimate of the deal price was just $500,000 off.

Susan Ivey, the chairwoman, president and chief executive of Reynolds, said that Niconovum would operate as a separate company.

Analysts have said they were curious about how Reynolds would potentially use and market cigarette-replacement products in gum, pouch and spray form made by Niconovum.

"Niconovum's products have great potential in meeting consumer demand and public health objectives," Ivey said. "This acquisition extends the harm-reduction strategies Reynolds American and its operating companies have been developing over the past several years."

Ivey said that by adding Niconovum, it would enable Reynolds to "provide adult tobacco consumers with innovative cessation products that have the potential to reduce the risks of diseases and death caused by tobacco use."

Ivey said that Reynolds intends to provide Niconovum "with the investment capital it needs to focus on product development and the testing required to enter additional markets."

Niconovum was formed in 2000 by Karl Olov Fagerstrom, who is considered a leading expert on smoking cessation and nicotine dependence. It is managed by many of the individuals who were pivotal in the development of Nicorette, a nicotine-replacement gum.

Reynolds said it plans to retain Niconovum's management team and keep its headquarters in Helsingborg.

"We believe the technology used in our Zonnic products better meets consumer preferences than other nicotine replacement therapies currently on the market," said Nils Siegbahn, the president and chief executive of Niconovum.

"With today's announcement, Niconovum will have access to the capital it needs to expand distribution of Zonnic to additional markets, and accelerate product refinements and new product development."

Stephen Pope, the chief global-market strategist with Cantor Fitzgerald Europe, said when talk of a deal first surfaced that it made sense as part of tobacco manufacturers' increased reliance on smokeless products as cigarette demand declines.

Government figures show that fewer than 44 million Americans smoke, down from a peak of 53.5 million in 1983.

Ivey wants to make Reynolds into what she calls "a total tobacco company." The biggest step that Reynolds has taken in that direction was buying Conwood, a smokeless-tobacco company, for $3.5 billion in April 2006.

Reynolds also has gone national with Camel Snus, a spitless tobacco product, and it has introduced orbs, sticks and filmlike strips for the tongue in test markets.

Further comment on the acquisition: Reynolds' pursuit of a company that promotes smoking cessation raises marketing question by Richard Craver, Winston-Salem Journal, 11/12/2009.

Reference: Reynolds to acquire Swedish company that makes product to help people quit smoking by Richard Craver, Winston-Salem Journal, 12/2/2009.

Related news brief: Reynolds American in Talks to Buy Maker of Smoking-Cessation Products..

Niconovum zonnic peppermint (menthol) mouth spray
Reynolds also has Camel strips for the tongue