2. Acquisitions

On April 24, 2012, Lorillard, Inc., through its wholly owned subsidiary, Lorillard Holdings Company, Inc. (“LHCI”), and its subsidiaries acquired blu eCigs and other assets used in the manufacture, distribution, development, research, marketing, advertising, and sale of electronic cigarettes for $135 million in cash. The acquisition was made pursuant to an asset purchase agreement (the “Agreement”) with BLEC, LLC, Intermark Brands, LLC and QSN Technologies, LLC (the “Sellers”). The Agreement contains customary representations, warranties, covenants and indemnities by the Sellers and LHCI. This acquisition provided Lorillard with the blu eCigs brand and an electronic cigarette product line.

The results of operations of blu eCigs are included in our consolidated financial statements beginning as of April 24, 2012. Lorillard’s consolidated revenues include $226 million and $61 million of sales of blu eCigs during the years ended 2013 and 2012, respectively. blu eCigs had operating income of $7 million and $1 million during the years ended, 2013 and 2012, respectively. Lorillard incurred $6 million of acquisition-related expenses during 2012.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are summarized below (in millions):


Assets acquired:
Current assets:
Accounts receivable	$	2
Inventories		15

Total current assets		17

Goodwill		64
Intangible assets		58

Total assets		139

Liabilities assumed:
Current liabilities:
Accounts and drafts payable		4

Purchase price	$	135

On October 1, 2013, Lorillard acquired certain assets and operations of SKYCIG^®, a United Kingdom (“UK”)-based electronic cigarette (e-cigarette) business for approximately £28 million (approximately $46 million) in cash paid at closing and contingent consideration of up to an additional £30 million (approximately $49 million at October 1, 2013 exchange rates) to be paid in 2016 based on the achievement of certain financial performance benchmarks.

The results of operations of SKYCIG are included in our consolidated financial statements beginning as of October 1, 2013. Lorillard’s consolidated revenues include $4 million of sales of SKYCIG during the year ended 2013. SKYCIG had an operating loss of $7 million since the date of acquisition. Lorillard incurred $4 million of acquisition-related expenses during 2013.

Lorillard is still in the process of finalizing a working capital adjustment that may increase total consideration transferred by up to $2 million. Therefore, the purchase price and goodwill amounts noted below could increase by up to $2 million as a result of finalizing this working capital adjustment. The fair values of the assets acquired and liabilities assumed at the date of acquisition are summarized below (in millions):


Assets acquired:
Current assets:
Accounts receivable	$	2
Goodwill		38
Intangible assets		35

Total assets		75

Liabilities assumed:
Current liabilities:
Accounts and drafts payable		3
Accrued liabilities		1

Total current liabilities		4

Earn out liability		25

Purchase price	$	46