Altria exits vaping group Juul after stake plummets in value

Marlboro maker Altria has swapped its minority stake in Juul Labs for intellectual property rights to some of the e-cigarette company’s heated tobacco prototypes, ending an investment which plummeted in value from $12.8bn just over four years ago following regulatory and legal setbacks.

The Virginia-based cigarette maker said in a statement after market close on Friday that it had exchanged its 35 per cent stake in Juul for a “non-exclusive, irrevocable global license” for some of Juul’s heated tobacco intellectual property. Despite years of work developing a heated tobacco device, Juul never launched a heat-not-burn product.

Altria’s decision to exit its investment comes after Juul reached a costly settlement for 5,000 lawsuits alleging that Juul fuelled a teenage “vaping epidemic” and the US Food and Drug Administration banned Juul’s products as part of its sweeping review of 6.7mn e-cigarette products.

At the end of last year Altria valued its Juul stake at just $250mn, a 98 per cent writedown on the valuation when it bought into the company in December 2018.

Billy Gifford, Altria chief executive, said the move was the “appropriate path forward for our business”. In a second bid to crack the vaping market, Altria is working on a $2.75bn deal to buy e-cigarette company NJOY, which unlike Juul has received approval from the FDA for some of its products, according to two people familiar with the matter.

“Juul faces significant regulatory and legal challenges and uncertainties, many of which could exist for many years,” said Gifford. Despite the FDA ban, Juul’s products remain on shelves after a US appeals court placed a stay on the decision and the regulator launched an additional review.

Gifford said Altria was “continuing to explore all options for how we can best compete in the e-vapor category”. Last year, Altria ended its non-compete agreement with Juul and launched a joint venture with Japan Tobacco focused on heated tobacco products.

A person close to Altria acknowledged that the IP rights may never be developed into a fully fledged product, pointing out that the “technology . . . could or could not potentially become part of the company’s product pipeline”.

Juul argued in a statement that Altria’s decision to divest its shares gave it “full strategic freedom” over the future of the company, freeing it up “to pursue other strategic opportunities and partnerships”.

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

“We are free to take advantage of a range of options to maximize the value of our company while we continue to advance our leading product technology and innovation pipeline,” said Juul. If Altria had retained its Juul stake, it would have been able to influence the terms of any sale or investment, and possibly even block a deal with a rival company.

Juul secured new funding from two existing investors last November but has been forced to cut jobs to preserve cash as it seeks to avert a mooted Chapter 11 bankruptcy filing.