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Altria Acquires 35% Stake in Juul Labs

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The deal

Today, Altria Group (MO) announced a $12.8 billion investment in Juul Labs for a stake of 35% in the e-cigarette company. At a valuation of $38 billion, Juul Labs becomes one of the most valuable private companies.

According to the agreement, Juul Labs will operate as an independent company and get access to Altria’s retail shelf space, where it can market its products to Altria’s customers using its database. Juul could also use Altria’s experience in logistics and distribution to improve its efficiency and reach.

After getting clearance from antitrust regulators, Altria could appoint one-third of Juul’s board of directors. Under the standstill agreement, Altria can’t increase its stake in Juul from 35%. Also, Altria has agreed not to sell or transfer its stake in Juul for the next six years.

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In a statement, Altria’s chairman and CEO, Howard Willard, stated, “We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes by investing $12.8 billion in JUUL, a world leader in switching adult smokers. We have long said that providing adult smokers with superior, satisfying products with the potential to reduce harm is the best way to achieve tobacco harm reduction. Through JUUL, we are making the biggest investment in our history toward that goal. We strongly believe that working with JUUL to accelerate its mission will have long-term benefits for adult smokers and our shareholders.”

Stock performance

Today, after the announcement, Altria was trading 0.8% higher in the pre-market trading hours. However, year-to-date, the company’s stock has fallen 28% as of December 19. The decline in cigarette sales and increased anti-tobacco regulation have led to a fall in the company’s stock price. Peers Philip Morris International (PM) and British American Tobacco (BTI) have fallen 31.8% and 52.5%, respectively.

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