Altria Sells Juul Stake, Acquires NJOY for $2.75 Billion

Three days after exchanging its 35 percent stake in Juul Labs for the rights to certain Juul intellectual property, Altria Group purchased NJOY Holdings. With the Juul acquisition, Altria's equity ownership in the financially struggling vape maker is terminated, along with any underlying agreements between the two companies.

With the acquisition of NJOY, Altria gains access to the limited market of vaping goods in the US that have FDA marketing approval. Of the seven vaping devices approved by the FDA, two are sold by NJOY. Since last summer, the business has been considering a sale to a significant tobacco corporation. Last week, there was news that Altria and NJOY were having serious discussions.

The biggest tobacco producer in the United States is Altria, the company that sells Marlboro cigarettes.

When Altria Acquires NJOY, Independent Mass-Market Vapes Come To An End.

On Monday, Altria paid $2.75 billion in cash to acquire NJOY. The FDA's marketing given orders (MGOs) for more flavored NJOY Ace pods might result in a $500 million increase in the final sale amount for NJOY.

With Altria's acquisition of NJOY, no producer of vaping products with FDA approval is now selling products that aren't owned by a big tobacco firm. In addition to NJOY's products, the FDA has approved the Vuse Solo, Vuse Ciro, and Vibe devices (owned by R.J. Reynolds/British American Tobacco) and two devices supplied by Logic (owned by Japan Tobacco International).

NJOY's sale of two vaping devices that have previously received FDA approval made it an obvious target for Altria to acquire. In April of last year, the government approved the NJOY Ace (as well as three refills with tobacco flavor) and in June, it approved two NJOY Daily variants with tobacco flavor.

The NJOY Ace is a contemporary pod-based vape with high-strength nicotine salt e-liquid, while the Daily is a low-powered disposable cigalike. The Ace might potentially compete with the top pod vape devices, the Vuse Alto and JUUL, in the convenience store/gas station sector.

Although NJOY now only holds 3% of the c-store market, Altria is certain that the NJOY Ace may become the industry leader thanks to its financial resources and distribution power. Altria CEO Billy Gifford said in a statement, "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."

As to the press release from Altria, in the event that the FDA approves the NJOY Ace menthol-flavored pod with a nicotine strength of 5% (50 mg/mL) or both the 5% and 2.4% versions, the NJOY retail price might rise by $250 million. Owners of NJOY would get $125 million if the FDA only approved the 2.4% version. Both menthol pods' premarket tobacco applications (PMTAs) are still under review.

Additionally, Altria disclosed that NJOY is almost ready to ship PMTAs for two "non-tobacco or menthol flavored" Ace pods. These pods will work with next NJOY devices that have Bluetooth access-restriction enabled. For each authorized pod, NJOY will receive an additional $125 million if the FDA approves any of those refills.

The FDA's decision to apply extraordinary standards to non-tobacco flavored vape products, however, is likely to make it difficult for NJOY or any of the major mass-market vapes to effectively compete with the hundreds of fruit and other non-tobacco flavors of gray market disposable vapes. This is true even if NJOY is authorized for one or two additional flavors. About half of the c-store vape business is made up of throwaway items like Elf Bars.

Juul and Altria: The Unhappy Conclusion To A Problematic Union

After a tumultuous four years, Altria announced on Friday that it was divesting from Juul. Altria paid $12.8 billion in December 2018 to purchase a 35% stake in the privately held e-cigarette company, which was valued at $38 billion at the time.

Less than two percent of its initial $12.8 billion spend, or $250 million, was Altria's investment when the company discontinued the arrangement. Furthermore, the business is still dealing with fallout from its tumultuous four years as a partial owner of Juul Labs.

Altria has not settled the majority of the numerous cases it has been hit with, despite Juul having done so from dozens of US states as well as thousands of local governments, school districts, and private citizens. This spring, a few cases are expected to be heard.

Juul and Altria's non-competition agreement expired in September of last year, allowing Altria to create its own e-cigarettes or acquire, license, or develop pre-existing brands.

Juul Labs, a financially distressed business that has battled since the FDA issued a marketing denial order (MDO) for Juul's flagship device last June, claims that the divestment represents a return to "full strategic freedom." Although the agency was compelled to change course and maintain its own marketing denial, Juul's survival in the US market is far from assured.

It was reported around the end of January that Juul was in negotiations with big tobacco companies to either sell the business, get a big investor, or come to a licensing or distribution agreement.

Regarding the Juul heated tobacco product (HTP), Altria obtained a "non-exclusive, irrevocable global license," but little else is known about it. (Juul Labs was formed by spinning out PAX Labs, a producer of several cannabis flower vaporizers that work similarly to HTPs.) Following the purchase of the rights to resell IQOS HTPs in the United States by erstwhile partner Philip Morris International (PMI) last year, Altria has lately undertaken additional HTP investments.