Days after exiting its stake in troubled electronic cigarette maker Juul, Altria announced a $2.75 billion investment in rival electronic cigarette startup NJOY.
The Marlboro maker gets full ownership of NJOY’s e-vapor product portfolio, the Virginia company said Monday, including its pod-based e-vapor product ACE.
“We believe we can responsibly accelerate U.S. adult smoker and competitive adult vaper adoption of NJOY ACE in ways that NJOY could not as a standalone company,” Altria CEO Billy Gifford said.
The agreement also includes an additional $500 million in cash payments contingent upon regulatory approval of some products by NJOY Holdings Inc., based in Scottsdale, Arizona.
Altria’s announcement comes just days after the company said that it was swapping its minority stake in Juul Labs for a license to some of Juul’s heated tobacco intellectual property.
Altria said that the carrying value and estimated fair value of its Juul investment was $250 million at the end of last year. The company will record the financial impact of the agreement in the first quarter of 2023 and plans to treat any amounts as a special item and exclude it from adjusted diluted earnings per share.
Juul said Friday when Altria exited its stake that it now has “full strategic freedom” to pursue other partnerships.
Gifford said that the swap was the right decision for Altria.
“Juul faces significant regulatory and legal challenges and uncertainties, many of which could exist for many years,” Gifford said.
In December Juul reached settlements covering thousands of lawsuits over its e-cigarettes.
The company faced more than 8,000 lawsuits brought by individuals and families of Juul users, school districts, city governments and Native American tribes. The settlement resolved most of those cases, which had been consolidated in a California federal court pending several bellwether trials.
Financial terms of the settlement were not disclosed.
Juul rocketed to the top of the U.S. vaping market more than five years ago on the popularity of flavors like mango, mint and creme brulee. But its rise was fueled by use among teenagers, some of whom became hooked on Juul’s high-nicotine pods.
Parents, school administrators and politicians largely blamed the company for a surge in underage vaping, which now includes dozens of flavored e-cigarette brands that are the preferred choice among teens.
Amid the backlash of lawsuits and government sanctions, Juul dropped all U.S. advertising and discontinued most of its flavors in 2019.
Altria’s interest in Juul’s heated tobacco intellectual property comes a few months after it made a deal with Japan Tobacco to help its effort to bring a heat-not-burn cigarette to the U.S. market.
Altria announced in October that it was launching a new venture with Japan Tobacco to commercialize cigarette alternatives developed by both companies for U.S. smokers. The partnership’s first effort will be to win U.S. regulatory approval for Japan Tobacco’s Ploom, a small handheld device that heats tobacco without burning it.