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Altria Group Inc. said Monday it would buy e-vapor company NJOY Holdings Inc. for $2.75 billion in cash, its second deal in recent days in the smokeless-tobacco space.
Altria
MO,
said the transaction includes $500 million in additional milestone payments, including control of all of NJOY’s e-vapor product portfolio.
It’s the second vaping deal that Altria has announced in recent days, after saying late last week that it had exchanged its minority economic investment in Juul Labs Inc. for a nonexclusive, irrevocable global license to certain of Juul’s heated-tobacco intellectual property.
Vaping currently ranks as the largest smoke-free consumption type in the U.S., with about 14 million adults, including 9.5 million exclusive adult vapers and about $7 billion in 2022 sales, Altria said.
Altria CEO Billy Gifford said that with the NJOY deal, the company will offer “strengths of our commercial resources” and expanded competition in the sector as a benefit to adult tobacco consumers.
NJOY has six products on the market that have received marketing authorization from the U.S. Food and Drug Administration, while its other products are still moving through in the regulatory process.
Altria expects the deal will be accretive to cash flow within two years of closing and will boost adjusted per-share earnings within three years of closing.
The company backed its guidance for 2023 of EPS of $4.98 to $5.13.
The stock was slightly lower in premarket trading and has fallen 13% in the last 12 months, while the S&P 500
SPX,
has fallen 6.5%.
Gifford said its ownership of intellectual-property rights for Juul “is the appropriate path forward” given that the company continues to face “significant regulatory and legal challenges and uncertainties, many of which could exist for many years.”
The company said last week it continues to explore all options for how it can best compete in the e-vapor category.
The deal with Juul comes after Altria paid $12.8 billion for a stake in the company in 2018. As of December, the value of the minority position had been written down to $250 million, noted Jefferies analyst Owen Bennett.
Bennett reiterated a buy rating on Altria on Sunday and said the deal could still pay off for Altria down the road.
“Juul’s value is likely to appreciate significantly again in the years ahead. [I]t could actually result in being a long-term [gain], first, if it ensures an NJOY deal goes through, and second, if it supports a leading market share in heated [products],” Bennett said.
Ciara Linanne contributed to this report.
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