Altria Group, Inc. (NYSE: MO) announced on Thursday that it has closed a USD 12.8 Billion investment into e-cigarette company, JUUL Labs, Inc. Altria’s investment represents a 35% stake in the Company.
Altria’s is looking to further accelerate its growth while at the same time reducing harmful effects of smoking. Juul will continue to remain as an independent company. Altria’s investment now puts Juul’s valuation at approximately USD 38 Billion.
“We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes by investing USD 12.8 Billion in JUUL, a world leader in switching adult smokers,” said Howard Willard, Altria’s Chairman and Chief Executive Officer. “We have long said that providing adult smokers with superior, satisfying products with the potential to reduce harm is the best way to achieve tobacco harm reduction. Through JUUL, we are making the biggest investment in our history toward that goal. We strongly believe that working with JUUL to accelerate its mission will have long-term benefits for adult smokers and our shareholders.”
Through Altria’s investment, Juul will gain access to its infrastructure and services. Altria said in its press release that it will provide Juul with its tobacco product retail shelf space, putting Juul’s tobacco and menthol pods next to combustible ones. Flavored pods will continue to be sold on Juul’s site.
Altria will apply its logistics and distribution experience to help Juul to expand. Juul will have the option to be supported by Altria’s sales organization, which covers approximately 230,000 retail locations.
Juul has rapidly grown in the recent years due to the large amount of smokers who use e-cigarettes as opposed to traditional cigarettes. The Company operates in eight countries, with more plans to expand globally. Juul represents approximately 30% of the total U.S. e-vape category.
The tobacco industry is slowly fading away as sales begin to diminish. Tobacco users are slowly dwindling, which has led Altria to make strategic investments to further its growth. Earlier this month, Altria made an investment into cannabis company, Cronos Group (NASDAQ: CRON).
Altria acquired a 45% equity stake in Cronos, representing a USD 1.8 Billion deal. Altria’s decision to enter into the cannabis market is due to the widespread of legalization taking place.
For the full year, Altria reaffirms its guidance for its 2018 full-year adjusted diluted earnings per share to be in a range of USD 3.95 to USD 4.03, representing a growth of 16.5% to 19%.