Altria Group’s ignominious journey with closely held Juul Labs has come to an end, with the tobacco company exchanging its minority stake for a non-exclusive global license to some of Juul’s heated-tobacco intellectual property.
(Bloomberg) — Altria Group’s ignominious journey with closely held Juul Labs has come to an end, with the tobacco company exchanging its minority stake for a non-exclusive global license to some of Juul’s heated-tobacco intellectual property.
The swap, outlined in a short statement after the Friday close, puts a bow on a $12.8 billion investment from 2018 that dwindled to a value of $250 million at the end of last year. With Juul still facing big regulatory and legal challenges, Altria Chief Executive Officer Billy Gifford said, “we are continuing to explore all options for how we can best compete in the e-vapor category.”
The seller of Marlboro cigarettes in the US last year ended a deal that had prevented it from competing with Juul, clearing the way to buy an e-cigarette firm or develop its own products. Last month, people familiar with the matter said Altria is in talks to buy vaping startup Njoy Holdings Inc. for at least $2.75 billion. For its part, Juul says it too has “full strategic freedom” to explore other partnerships now that it’s released from the ownership tether.
The deal caps “Altria’s long unfortunate investment saga with Juul,” Kenneth Shea, senior analyst for beverages and tobacco at Bloomberg Intelligence, said by email. Altria is “conceding that it is better off getting something of potential value for it as opposed to the very good chance it could go to zero.”
The question, Shea said, is what is the ultimate value of those new IP rights. Altria needs to move quickly in this part of the market because its exclusive rights to market Philip Morris International’s IQOS heated tobacco products in the US expires in April 2024, he added.
Plus and Minus
Jefferies analyst Owen Bennett, who has a buy rating on Altria, considers the development a clear negative given what was paid for the 35% stake. But there could be positives in the longer term if the intellectual property makes Altria more competitive in heated tobacco or removes antitrust issues in its possible deal for Njoy.
Among Juul’s challenges, the US Food and Drug Administration banned the sale of its products last summer, though they remain on shelves amid a stay. It won initial approval from a judge for a settlement to resolve thousands of lawsuits targeting it as a cause of a youth vaping epidemic. The company got a financial lifeline in the fall from a pair of longtime shareholders that let it shelve a bankruptcy plan.
Richmond, Virginia-based Altria closed at $46.53 on Friday, giving it a market valuation of about $83.1 billion. The shares have dropped about 12% in the past year and are down from a peak of about $78 in 2017.
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