Imperial Tobacco to sell its Puritane e-cigarette products in Boots stores in UK

LONDON , February 21, 2014 () – Big tobacco has made another significant move into the e-cigarette market with news that Imperial Tobacco is to sell its Puritane product in Boots stores, lifting the company's share price.

Both BAT and Imperial had looked at one point as if they were being left behind in the e-cigarette market, which is dominated by independent businesses such as E Lites and Nicolites.

But BAT has just launched an advertising campaign for its Vype e-cigarettes, while the Imperial move means its products, made by its Fontem subsidiary, will be on sale on the high street from Monday.

The future of smoking has been in the spotlight recently, with UK health regulators saying all e-cigarettes have to be licensed as medicines by 2016, while US pharmacy chain CVS announced it would stop selling tobacco cigarettes.

The deal with Boots has lifted Imperial's shares by 17p to £23.77, and analyst Damian McNeela at Panmure Gordon said:

The launch of Imperial's Puritane e-cigarette brand in Boots from Monday is slightly ahead of our expectations and should ease concerns over Imperial being a laggard in the space. Additionally, the launch directly into a high street pharmacy, in our view, should help to minimise the risk to its tobacco profits in the UK in the short term. Tobacco manufacturers are playing an increasing role in the e-cigarette market but the longer term impact on the tobacco industry still remains uncertain. We view Imperial's current valuation as undemanding, but set against a weak volume backdrop, particularly in Europe, and limited 2014 estimated earnings growth (we forecast 1.4%) we feel the shares look fair value. Hold.

(c) 2014 Guardian Newspapers Limited.

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