Altria pays $12.8 bln for minority stake in e-cigarette company Juul

RICHMOND, Virginia – Reuters

Marlboro cigarette maker Altria Group Inc on Dec. 20 announced it would pay $12.8 billion to take a 35 percent stake in Juul Labs Inc, a marriage between an old-line tobacco giant and a fast-growing electronic-cigarette rival looking to make inroads among smokers.

The deal values San Francisco-based Juul at $38 billion, more than double the roughly $16 billion valuation it fetched in a July private funding round, highlighting what Altria sees as its next phase of growth in the face of declining smoking rates and cigarette sales in the United States.

“We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes,” Altria Chief Executive officer Howard Willard said in a statement.

For Juul, which has risen swiftly over the last three years to become the U.S. market leader in e-cigarettes, the Altria investment is expected to give it more prominent distribution in convenience stores and other traditional retail channels.

Altria also brings years of lobbying expertise in Washington that could benefit Juul as the company navigates heightened federal scrutiny over its products’ popularity among teenagers.

Under terms of the deal, Altria is subject to a standstill agreement under which it may not buy additional Juul shares above its current interest. Altria has also agreed not to sell or transfer any Juul shares for six years from the closing of the deal.

Juul’s vaping devices, which vaporize a nicotine-laced liquid and resemble a USB flash drive, grew from 13.6 percent of the market in early 2017 to more than 75 percent this month, according to a Wells Fargo analysis of Nielsen retail data.

Federal data released last month showed a 78 percent increase in high school students who reported using e-cigarettes in the last 30 days, compared with the prior year, coinciding with the rise in Juul’s popularity.

The U.S. Food and Drug Administration last month announced new curbs on sales of flavored e-cigarette products, including Juul’s mango and cool cucumber, amid fears that the products could lead a new generation into nicotine addiction.