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Altria spending $12.8B for a stake in e-vapor company JUUL

23 December, 2018, 00:25 | Author: Lawrence Cooper
  • Juul employees will soon go home millionaires

Earlier this month Altria, whose Marlboro Man branding was once a symbol of tobacco's popularity, said it would discontinue some of its own e-cigarette brands.

"Our success ultimately depends on our ability to get our product in the hands of adult smokers and out of the hands of youth", Juul chief executive Kevin Burns said in a statement Thursday.

According to Crunchbase data, Juul has raised US$761 million in three previous funding rounds, including a US$650 million investment in July led by venture capital firm Tiger Global Management.

"We strongly believe that working with JUUL to accelerate its mission will have long-term benefits for adult smokers and our shareholders", the statement read.

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In addition, Juul believes that it can not "fulfill its mission to provide the world's one billion adult smokers with a true alternative to cigarettes if youth use continues unabated".

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Juul will remain an independent company, but it gains access to Altria's massive infrastructure and reach. This is of particular concern for young people, because it could make it easier for them to initiate the use of nicotine through these products and also could make it easier to progress to regular e-cigarette use and nicotine dependence. In its release Thursday, Altria said Juul represented approximately 30 per cent of the US e-cigarette space, when factoring in online sales and products in specialty stores such as vape shops. The company has said it wants to help smokers move to safer products, and is also developing a type of cigarette that uses warmed tobacco and that the company says delivers fewer toxins. Altria also has a deal to market Philip Morris's "heat not burn" device IQOS, already sold internationally, if it wins US regulatory approval. The agency in November proposed a series of new regulations, including barring online sales of flavored e-cigarettes products, only allowing them to be sold in stores.

Federal data from earlier this month showed 14 per cent of USA adults smoked cigarettes, the lowest level ever recorded. The company's share price has fallen by almost 30 percent over the a year ago.

The tobacco giant, which had revenues of $25.6 billion in 2017, plans $500 to $600 million in annual cost savings through job cuts and other measures.

Multiple reports suggested that some Juul employees have been upset about the rumored Altria investment.

The company expects pre-tax charges of about Dollars 230 million to USD 280 million, or nine to 11 cents per share, the majority of which will be incurred in the fourth quarter of 2018.

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