Economy

Altria Buys 35 Percent Stake In E-Cigarette Maker Juul

Altria Buys 35 Percent Stake In E-Cigarette Maker Juul

"Altria's interests are served by maximizing sales and profits from both the cigarette and e-cigarette markets, and they have every reason to push Juul to market its products in a way that does the least damage to the cigarette market".

After several weeks of speculation, Altria Group Inc. made a $12.8-billion investment in Juul Labs Inc.

Earlier this month Altria, whose Marlboro Man branding was once a symbol of tobacco's popularity, said it would discontinue some of its own e-cigarette brands.

Partnering with Big Tobacco may not seem like the best way to do that, optically speaking.

In 2017, a federal court ordered cigarette companies, including Altria, to pay for ads admitting the dangers of smoking, including the statement "Smoking kills 1,200 people a day".

Altria has invested in e-cigarettes in recent years through its Nu Mark subsidiary, which sells devices such as the MarkTen in convenience stores and tobacco shops.

More news: Key Senate Democrat says Trump 'should withdraw' attorney general nomination

Juul employees are about to get some hefty bonuses, thanks to a new investment from one of the largest tobacco companies in the world. Juul will remain fully independent.

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.

However, that is dwarfed by Altria's spending of more than $7m this year, making it the biggest spender in the USA tobacco industry. A note from Stifel said the deal should help Altria "address the changing consumer attitudes towards nicotine" but that "the price paid offsets most of the future potential benefit" from a Juul investment.

If the deal is approved, Altria will be able to appoint one-third of Juul's board of directors, and Juul will gain access to Altria's customer databases and shelf space. In early December Altria spent $2.4 billion to buy nearly half of Canadian marijuana company Cronos Group Inc. Yet it's also not surprising in a strategic sense, says Philip Morris's King.

Altria is taking out $14.6 billion in debt to finance the deal, and said Thursday they'd also reduce spending and will cut an unknown amount of jobs.

The company expects pre-tax charges of about $230 million to $280 million, or nine to 11 cents per share, the majority of which will be incurred in the fourth quarter of 2018.


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