Marlboro maker ditches Juul and buys NJOY

Marlboro maker Altria Group agreed to buy vaping pioneer NJOY Holdings for at least USD 2.75 billion, after closing the chapter on its disastrous investment in e-cigarette maker Juul Labs, The Wall Street Journal said.
The deal for NJOY, one of the few e-cigarette makers whose products have clearance from federal regulators, includes an additional USD 500 million if the Food and Drug Administration authorises additional NJOY products. Those include the menthol-flavoured refill pods it currently sells and a new version of its device that uses a Bluetooth connection to authenticate the user before unlocking, according to WSJ.
The Wall Street Journal reported last week that Altria was in advanced talks to buy closely held NJOY for at least USD 2.75 billion and divest its stake in Juul.
Altria has spent tens of billions of dollars over the past decade in an effort to pivot toward less-harmful products as US cigarette smoking declines, but its efforts have largely flopped. The company tried and failed to develop new e-cigarettes that appealed to smokers. It then spent nearly USD 13 billion on a stake in Juul. The vaping market leader’s valuation quickly evaporated.
Swamped by lawsuits alleging that it had targeted minors, Juul came close to filing for bankruptcy last year. Juul has since settled much of that litigation but its future remains in question amid a dispute with the FDA over whether its e-cigarettes can remain on the US market, according to WSJ. Juul has said it never targeted young people and has been working to regain the trust of regulators and the public.
The Federal Trade Commission sued to unwind Altria’s investment in Juul, a case that was pending when Altria said Friday that it had divested from the embattled e-cigarette maker. The stake for which Altria had paid USD 12.8 billion is now worth only USD 250 million, Altria said.
Altria traded its equity for nonexclusive rights to some of Juul’s intellectual property related to heated tobacco devices, according to WSJ. Altria’s decision to acquire NJOY was informed by lessons the tobacco giant learned from its failed Juul investment, Altria Chief Executive Billy Gifford said Monday on a call with analysts and reporters.
“One is certainty. This is an authorized product versus a pending product. There are no litigation challenges. The youth usage is minimal,” Gifford said. “The other is about control. This is about 100 per cent ownership versus a minority investment.”
NJOY has obtained clearance from the FDA to sell its tobacco-flavoured e-cigarettes in the US, a hurdle that so far has eluded the two biggest brands: Juul and Vuse Alto, which is owned by Reynolds American. Juul has appealed the FDA’s decision to order its products off the market; the agency’s review of Vuse Alto is still under way, according to WSJ.