On June 3, Altria Group (MO) announced that it signed a definitive agreement to acquire 80% of the stake in Burger Söhne Holding—a private Swiss company that sells oral nicotine pouches under the “0n!” brand. As part of the deal, Altria will start distributing the on! brand before the agreement closes. The deal is expected quickly expand the on! brand’s availability across the US. Currently, the on! brand is sold in selected US retail outlets, Sweden, Japan, and online.
Altria has formed a new subsidiary, Helix Innovations, which will be the parent of Burger Söhne subsidiaries after the deal closes. Altria expects the all-cash transaction to be closed in the second half of 2019.
The on! brand’s portfolio consists of 35 SKUs with seven flavors and five nicotine strengths. The products were introduced before August 8, 2016—the deadline to introduce a new tobacco product to the market without the FDA’s permission. According to IRI, a market research firm, the sales from the oral pouch category grew 250% in 2018 to $60 million.
With Altria’s core business shrinking, the company continues to diversify its business. In December 2018, the company invested in Cronos Group (CRON), a Canadian cannabis company, and Juul Labs, the leader in the e-cigarette business.
Altria’s announcement about investing in Burger Söhne appears to have increased investors’ confidence. On June 3, Altria’s stock price rose to a high of $50.15 and closed the day at $50.10—a rise of 2.1% from the previous day’s closing price. Altria has returned 1.4% YTD (year-to-date). The company has been lagging the broader equity market and its peers in 2019. The S&P 500 Index has increased 9.5% this year, while Philip Morris International (PM) and British American Tobacco (BTI) have returned 17.8% and 10.5%, respectively.