What Should Investors Do About Reynolds American’s Rumoured Acquisition of Lorillard?

According to a recent Financial Times article, Reynolds American (NYSE: RAI  ) is considering acquiring its competitor Lorillard (NYSE: LO  ) . Notwithstanding the authenticity of this piece of news, this potential acquisition doesn't make much strategic sense.
Not for the e-cigarettes Being the first among the Big Three tobacco companies to enter the e-cigarettes space with the purchase of Blu eCigs in 2012, Lorillard now accounts for nearly half of the e-cigarette sales volumes in the U.S. While Reynolds American's potential acquisition of Lorillard will greatly expand its market share in e-cigarettes, it runs contrary to Reynolds American's current actions.
Reynolds American introduced its VUSE digital vapor cigarettes into Colorado in June 2013 and has experienced very positive feedback from consumers there. VUSE is the no. 1 ranked e-cigarette brand in the state and has achieved a market share of 61.5% as of October 2013. In fact, VUSE's market share is more than three times that of Lorillard's Blu in Colorado. With a nationwide launch planned for mid-2014, it seems premature for Reynolds American to buy Lorillard now because of e-cigarettes.
Not for mentholAnother potential reason for the purchase of Lorillard will be its market leadership in menthol, given that Lorillard's Newport is the leading menthol brand in the U.S. However, Reynolds American does have exposure to the menthol segment and is doing decently well. Reynolds American's premium menthol brand Camel Menthol has seen its market share rise from below 2% in 2010 to about 3.5% now.
On the other hand, its value menthol brand Pall Mall has also increased its market share from 8.5% in the first quarter of 2011 to about 8.9% as at the end of the third quarter of 2013. Furthermore, there remains significant uncertainty as to the degree of menthol regulation in the future.