British American Tobacco PLC's (LSE:BATS) attempt to buy disposable vaper brand ElfBar last year was a questionable move at best, if the story is true in the first place, said analysts at Jefferies.
Reports in the Grocer today, quoting ‘a senior source’, said BAT first approached the vape group last August but was turned down finally in December.
“If true, while we see no problem acquiring competition, and it is a playbook of the cigarette model of old, and will likely be a key driver of future vape consolidation, we would have concerns that this particular deal may be seen as a possibly smart by BAT given the bad press surrounding ElfBar.”
Reports in the Daily Mail had suggested ElfBar devices containing 50% more than the legal limit of liquid nicotine were being sold in supermarkets, something the company attributed to a one-off mistake.
“Further, it almost certainly would not have helped its PMTA [marketing/regulatory] prospects in the US, in our view.”
Jefferies added there is controversy surrounding ElfBar and teenage usage, both in the UK and the US and it is likely that disposables will face heavy regulation sooner rather than later.
“Against this backdrop, this particular deal makes no sense for us, both in terms of profit outlook and reputational/regulatory outlook.
Finally, Jefferies questions whether this story is perhaps a move potentially to embarrass the tobacco giant in light of its recent attempts to get regulators to act over ElfBar disposables.