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Manchester meets Michigan in Victory/VIP deal

Victory E-Cigs continues to acquire other electronic cigarette firms, consolidating its position as the largest independent (non-Big-Tobacco) manufacturer of the product. The latest acquisition for the Michigan-based company is VIP e-cigs, based in Manchester, UK, one of the strongest European vaping products companies. The purchase price was in excess of £30M, or about $50M, in cash and stocks.

Founded in 2009 in the Manchester suburb of Radcliffe, by David Levin and Miguel Corral, VIP has taken a leadership position in the UK and across the European Union, especially in Ireland.

Victory's Brent Willis has high praise for the VIP leadership team, calling the company a "high potential franchise" that will be "taking on broader global roles in the combined enterprise." Willis says Victory has not seen a more profitable firm worldwide in therms of percentage of sales. “Their product portfolio, premium brand, and distribution approaches have global potential," the Victory CEO predicted, proclaiming the  intention "to heavily invest in expanding their distribution model and product portfolio.”

VIP made the news a few months ago with an advert on British telly that was criticised for using sexual innuendo to sell e-cigs. The firm's advertising department claimed that the ads, which featured an actress and actor talking about the unseen product as though they were speaking about sexual entities or acts, were created because regulators had barred display of the product itself in the advertisement for it. "We decided to take a tongue in cheek approach to appeal to an adult audience," said a spokesperson, admitting that the 20-second spots were "controversial and pushed boundaries". The Advertising Standards Agency received 147 complaints. Victory Electronic Cigarettes Corporation seems untroubled by the flap.

Victory's position as market leader among independent companies (companies that do not produce poisonous cigarettes as well as vaping supplies) is also bolstered by the recent acquisition of another leading US independent, FIN Brands, and the UK's Vapestick, another European leader. Shortly after Vapestick's acquisition by Victory, the CEO and co-founder of Vapestick, Michael Clapper, was appointed President of international operations for the merged company, and lost no time in moving into the Russian e-cigarette market.

Clapper was soon after that elected Chairman of the leading industry group in Europe, The Electronic Cigarette Industry Trade Association (ECITA). The trade group is noted for setting high standards for member companies, thus increasing regulators' confidence in the industry's probity.

Victory's reliance on Clapper's credentials, connections, and skills, and Clapper's emergence as an industry leader in Europe, suggests that Victory's stated intent to utilize the leadership potential of its European acquisitions, now including VIP as well as Vapestick, is more than idle talk.

Victory/FIN is also one of the companies facing a legal challenge for patent infringement, initiated by Dutch firm Fontem, maker of Puritane e-cigs and a totally owned subsidiary of Big Tobacco giant Imperial Tobacco, based in Bristol, UK. The lawsuit appears to be a revival of a legal action taken earlier by Chinese firm Dragonite (formerly Ruyan, the first marketer of the Chinese invention of 2003), charging essentially the same list of companies with unfair use of a patented Chinese technology. Last year Imperial bought Dragonite, allegedly including its patents, for $75M. Further legal developments include the claim of a new American company, Emperor Brands, to own the original US patent of the forerunner product. Victory's growth as an independent company will no doubt impact these patent cases, as it will impact the impending marketing duel between Big Tobacco and the independents. Lorillard, whose e-cig offering was added by acquiring an independent company, is the only Big Tobacco firm listed in the Fontem suit.