Altria Is Trying To Purchase E-Cigarette Startup NJOY
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Traditional cigarettes are slowly becoming a thing of the past to give way to modern e-cigarettes. In order to stay on the market, companies must take action in this direction.
Altria and NJOY
Altria, the largest US cigarette maker, has been trying to develop or acquire e-cigarettes for years as smoking has declined in the US.
Manufacturer Marlboro Altria Group Inc. is in advanced talks to purchase e-cigarette startup NJOY Holdings Inc. for at least $2.75 billion and plans to divest its stake in Juul Labs Inc.
A deal for NJOY, one of the few e-cigarette makers whose products are authorized by federal regulators, could be announced as early as this week, people have said, although talks could yet fall apart. The proposed deal includes an additional $500 million in profit if certain regulatory milestones are met.
E-cigarette company NJOY Holdings Inc. it hired bankers to advise on a possible sale.
The potential deal could value NJOY at around $5 billion, the process is in its early stages and there is no guarantee a deal will go through.
The potential deal for NJOY would not be $5 billion or more as some of the company's investors had hoped NJOY would bring. People familiar with NJOY said last summer that if talks with potential bidders did not lead to a high enough valuation, the company could raise more money privately and wait for an initial public offering.
NJOY
NJOY is the third largest manufacturer of e-cigarettes in the US with 3% of sales in stores tracked by Nielsen.
The vaping pioneer has permission from federal regulators to sell tobacco-flavored e-cigarettes in the US, which has so far bypassed the two biggest e-cigarette brands, Juul and Vuse Alto.
It sells a single-use e-cigarette called NJOY Daily and a refillable e-cigarette called NJOY Ace. Tobacco flavored versions have been approved for sale in the US by the Food and Drug Administration.
In 2018, the tobacco giant paid $12.8 billion for a 35% stake in Juul Labs Inc. , only to see the demise of the vaping market leader.
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Juul and Altria
Juul, embroiled in a dispute with federal regulators and flooded with lawsuits alleging it attacked minors, came close to filing for bankruptcy last year.
Juul has since settled most of that dispute, but its future remains in doubt amid a dispute with the Food and Drug Administration over whether its e-cigarettes can remain in the US market. Juul said it has never targeted young people and is working to regain the trust of regulators and the public.
Altria now values Juul at $714 million - less than the $38 billion valuation when Altria first invested.
The Federal Trade Commission is expected to issue a decision in March on whether to withdraw Altria's investment in Juul.
Moreover, tobacco giant Altria Group Inc. went to trial, accused of violating antitrust laws by giving up e-cigarettes at the request of rival Juul Labs Inc.
A key question at the trial was why Altria ended production of its own e-cigarettes in late 2018, shortly before announcing its investment in Juul.
Altria says it has halted sales of e-cigarettes due to pressure from regulators to limit youth use and an internal settlement over the company's inability to develop a successful vaping product.
Altria share price
At the end of January, Altaria's shares rose and since then remained above 46.00 in February. Most recently, MO shares fell slightly from 47.51 to close at 46.54
Source: wsj.com, finance.yahoo.com
