(MENAFN) Altria, the company behind Marlboro cigarettes, has announced a USD2.75 billion investment in electronic cigarette startup NJOY. This comes just days after Altria exited its stake in Juul, a troubled electronic cigarette maker. As part of the agreement, Altria gains full ownership of NJOY's e-vapor product portfolio, including its pod-based e-vapor product ACE.
Altria CEO Billy Gifford expressed confidence in the deal, stating that the company believes it 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." In addition to the USD2.75 billion investment, the agreement includes an extra USD500 million in cash payments contingent upon regulatory approval of some products by NJOY Holdings, which is based in Scottsdale, Arizona.
Altria's investment in NJOY represents a shift in the company's strategy, as it moves away from its stake in Juul, which has faced numerous regulatory and legal challenges. Altria said that the carrying value and estimated fair value of its Juul investment was USD250 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.
The move also comes as the electronic cigarette industry faces increasing scrutiny from regulators and health officials, who have raised concerns about the potential health risks of e-cigarettes, particularly among young people. Juul, in particular, has been criticized for its marketing practices, which some argue have targeted teenagers and other vulnerable populations.
Despite these challenges, Altria's investment in NJOY suggests that the company sees a future in the electronic cigarette market. With full ownership of NJOY's e-vapor product portfolio, Altria believes it can drive adoption of NJOY's products among adult smokers and vapers. The agreement also gives NJOY the financial backing it needs to compete with larger players in the industry, such as Juul and Reynolds American.
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