Altria Group Inc. is in discussions to acquire vaping startup Njoy Holdings Inc. for at least $2.75 billion in cash, according to people with knowledge of the situation.
(Bloomberg) — Altria Group Inc. is in discussions to acquire vaping startup Njoy Holdings Inc. for at least $2.75 billion in cash, according to people with knowledge of the situation.Â
A deal could be announced as soon as this week, said the people, who asked not to be identified because the talks are private. There is also $500 million in follow-up payments if Njoy hits certain regulatory milestones, the people said.
Mudrick Capital Management which took a controlling stake in the vaping company as it emerged from bankruptcy in 2017, is expected to cash out on its investment when the deal closes, the people said. Mudrick held a 51% stake when the company was valued at about $40 million. The investment drew outsized gains for the hedge fund in 2019, despite the escalating regulatory scrutiny on youth vaping. The Wall Street Journal previously reported on the talks between the two firms.
A representative at Mudrick declined to comment. An Altria spokesperson said the company doesn’t comment on rumors and speculation. Njoy didn’t return a message seeking comment.Â
Njoy would add more vaping expertise to Altria with its e-cigarette products, some of which can be marketed in the US under an authorization from the Food and Drug Administration. In April and June of last year, the agency said some of Njoy’s products can continue to be marketed to Americans, including disposable e-cigarettes, a closed e-cigarette device and flavored e-liquid pods. At the same time the FDA denied some of the Scottsdale, Arizona-based company’s other products as part of a sweeping review of vaping devices.
Altria, which sells Marlboro cigarettes in the US, has for years been looking to diversify its business. It’s expanding into smoke-free nicotine alternatives as it struggles against global declines in cigarette smoking, which has been linked to serious health risks.Â
Prior attempts to branch out haven’t gone that well. The IQOS heated-tobacco product it was supposed to market in the US for Philip Morris International Inc. didn’t take off, and last year Altria struck a deal to sell its rights to market the device to PMI. Altria also relinquished products it had been developing in-house when it first took a stake in Juul Labs Inc. That investment went poorly, and the agreement ended in September.
Last year Altria teamed up with Japan Tobacco International to offer new heat-not-burn devices, on which it has said it plans to announce more details in March. Â
The Richmond, Virginia-based company’s oral nicotine product, On!, has also become a major focus for the company.
Altria closed down 1.3% in New York trading on Monday, the stock’s biggest one-day drop in a month.
(Updates with proposed deal details in first three paragraphs, updates shares in final paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.