Altria set to buy e-cigarette maker Njoy for at least $2.75 billion

Altria, the maker of Marlboro cigarettes in the United States, is set to strike a deal to buy e-cigarette company Njoy for at least $2.75 billion, according to people familiar with the matter.

The deal would give Altria a second bet in the vape market, five years after spending $12.8 billion to buy 35% of Juul, the US e-cigarette market leader at the time. Altria has since reduced the valuation of that investment to just $250 million after Juul suffered a series of regulatory and legal blows.

Last year, Njoy received approval from the U.S. Food and Drug Administration to continue selling its tobacco-flavored Ace pod-based vaping brand and Njoy Daily disposable vaping product, as part of the regulator’s extensive review of 6.7 million vaping products.

In contrast, other e-cigarette products have struggled to gain agency approval. Juul’s products were banned last year for helping to increase vaping among minors, but they remain on the shelves after a US appeals court stayed the FDA’s decision and the agency has launched an additional review.

Current Njoy shareholders could receive an additional $500 million payment as part of the deal if further regulatory milestones are met, including approval of its menthol-flavored products under review by the US. agency, according to a person familiar with the matter.

The potential deal, first reported by The Wall Street Journal, would mark a huge turnaround for US company Njoy, which emerged in 2017 from bankruptcy protection.

Its main shareholders are Mudrick Capital Management, which in 2017 paid around $40 million for a majority stake in the company, according to a person familiar with the matter. Mudrick has since partially sold the stake.

Another investor is Homewood Capital, a private equity firm led by Douglas Teitelbaum, who chaired Njoy until last year.

“If (Altria) wants to know they’re going to have a (vape) product, there’s really only one high-quality, super-well-made product that can give them the certainty of being in the market” , said a Njoy investor.

Altria declined to comment. Njoy did not immediately respond to a request for comment.

In September, Altria ended a non-compete agreement with Juul, but its management continued to express confidence in the future of e-cigarettes.

“E-Vapor remains the largest smoke-free category in the United States and the most successful category in keeping American smokers away from cigarettes,” Altria Chief Executive Billy Gifford said on an earnings call. this month.

In the three months to mid-February this year, Juul accounted for 26.5% of U.S. e-cigarette sales, up from 34.3% a year earlier, according to a Cowen analysis of NielsenIQ data. Njoy represented only 2.7% of the market.

Juul secured new funding from two existing investors last November, but continued to cut jobs to preserve cash as it seeks to avoid a Chapter 11 bankruptcy filing.

Juul executives have been probing tobacco companies, including Japan Tobacco and Philip Morris International, in recent months about a possible investment, sale or licensing deal, according to people briefed on the talks who said that potential investors were still wary of the remaining legal and regulatory risks.

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