Published: Sun, December 23, 2018
Money | By Arnold Ball

Altria takes stake in Juul e-cigarettes for US$12.8B

Altria takes stake in Juul e-cigarettes for US$12.8B

The cigarette maker also agreed not to sell the shares for six years, during which Juul will be Altria's only e-vapor business.

USA tobacco giant Altria, maker of major brands such as Marlboro and Chesterfield, announced Thursday that it will buy a 35 percent stake in popular e-cigarette maker Juul for $12.8 billion.

"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".

Altria is buying 35% of San Francisco-based Juul, valuing it at £38bn.

In addition, Juul believes that it can not "fulfill its mission to provide the world's one billion adult smokers with a true alternative to cigarettes if youth use continues unabated".

Juul offered no comment to Newsweek beyond the statement.

"We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the US", Burns wrote. "We strongly believe that working with Juul to accelerate its mission will have long-term benefits for adult smokers and our shareholders". Executives said they have no knowledge of how the U.S. Food and Drug Administration, which has expressed concerns about youth smokers and flavors, views the deal.

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Altria's investment puts Juul's valuation at $38 billion. The company has said it wants to help smokers move to safer products, and is also developing a type of cigarette that uses warmed tobacco and that the company says delivers fewer toxins.

Shea said he won't be surprised if Altria eventually tries to take a majority stake in Juul.

Altria's shares fell as much as 3.6 percent in NY on Thursday to $49.57 as of 10:19 a.m., the lowest intraday level since August 2015. The F.D.A. has said it intends to create new regulations requiring traditional cigarette makers to reduce the amount of nicotine in their products.

Also this month, Altria announced a $1.8 billion investment in Cronos Group Inc CRON.TO , which could give it up to 55-percent ownership of the Canadian cannabis producer.

Altria said this month it would discontinue some of its e-cigarette brands, based on their financial performance and will take a related pre-tax charge of United States dollars 200 million in the fourth quarter.

Altria on Thursday also announced a cost-cutting program that includes workforce reductions and reduced third party spending, to save United States dollars 500 million to USD 600 million annually by the end of 2019.

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