Quitting Cigarettes

So your immensely profitable entrenched business has this big problem: The product kills people, and now governments around the world are looking to regulate you even more.

In fact, in the U.S., the FDA is finally regulating your product, after years of resistance to such regulation.

What do you do?

In the case of Reynolds American, the second-largest cigarette maker in the U.S., you look to buy a smoking-cessation company, among other moves away from your core of selling Camels and other cigarettes.

Reynolds, which is already pioneering a new product called Camel Snus—a smokeless and arguably less dangerous product than cigarettes—is in advanced talks to buy a Swedish company that makes smoking-cessation products, the Wall Street Journal reports.

The Journal cites David Sweanor, a Canadian law professor and tobacco expert, as saying the deal talks with Niconovum AB are under way. Sweanor tells the Journal he was briefed by people close to the deal.

Niconovum makes the Zonic pouch and Zonic gum, nicotine-replacement products that aren't currently sold in the U.S.

Neither Reynolds nor the largest U.S. cigarette maker, Altria Group, currently sells nicotine-replacement products. And the cigarette business remains profitable.

Reynolds controls about 28 percent of the U.S. cigarette market, and reported third-quarter earnings of $1.24 per share, up 72.2 percent. Still, the long-term prospects for cigarette makers are about as good as a two-pack-a-day smoker.

Reynolds revenue in the third quarter was $2.1 billion, down 5.3 percent from last year's $2.3 billion.