Tobacco Giant Altria Takes $13 Billion Stake In Juul Labs

Marlboro maker to invest $13bn in Juul e-cigarettes

Tobacco companies including Altria have been investing in e-cigarettes as U.S. smoking rates decline, but those products have lost significant market share over the past year as Juul's popularity has surged.

Juul announced Thursday that Altria, the maker of Marlboro cigarettes, invested $US12.8 billion into the e-cigarette startup, good for a 35% stake.

The company is the U.S. market leader in e-cigarettes, and the Altria deal is expected to give it more prominent distribution in convenience stores and other traditional retail channels.

The $12.8 billion deal gives Altria 35 percent of Juul's shares. "They see Juul as their failsafe in case the cigarette market keeps declining so that they remain profitable no matter what happens".

Altria, which is focused on the USA market after spinning off Philip Morris International Inc.in 2008, will get one-third of the seats on Juul's board upon antitrust clearance.

Juul CEO Burns called Altria a "seemingly counterintuitive" investor but said the company is convinced the deal could "help accelerate our success switching adult smokers".

There is a scramble in the U.S.to reverse a recent explosion in teen vaping that public health officials fear could undermine decades of declines in tobacco use.

Super Smash Bros. Ultimate is the fastest-selling Switch game ever
The company did share promising news, that being that Nintendo hardware unit and dollar sales are their highest annual since 2011. The more recent Super Mario Party stands at 1.4 million and Pokémon: Let's Go a total of 2 million.

But Juul, founded in 2015, has nevertheless found itself at the center of controversy over the appeal of its products to young people.

One unknown is how the deal could affect Juul's reputation in the marketplace.

There's a standstill agreement in place, meaning Altria won't increase its ownership share of Juul, nor will it sell or transfer its shares for six years.

The New York Times notes that the deal also gives Juul access to Altria's powerful lobbying and regulatory force. Juul has enjoyed explosive growth and now dominates the e-cigarette market. Truth Initiative, a nonprofit dedicated to eliminating tobacco use, said Juul's deal with Altria was a worrying sign.

The investment comes about two weeks after Altria stepped into the cannabis market with an investment of around $2 billion in Cronos Group, the Canadian medical and recreational marijuana provider.

Altria said this month it would discontinue some of its e-cigarette brands, including all of MarkTen and Green Smoke e-vaper products, based on their financial performance and will take a related pre-tax charge of $200 million in the fourth quarter.

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.

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