Altria Exchanges Minority Stake in JUUL Labs for Heated Tobacco Intellectual Property Rights

Rhea-AI Summary

Altria Group, Inc. (NYSE:MO) has exchanged its minority investment in JUUL Labs, Inc. for a non-exclusive global license to JUUL's heated tobacco intellectual property. This decision comes amid JUUL's ongoing regulatory challenges. CEO Billy Gifford stated this strategy aligns with their business objectives. As of December 31, 2022, the carrying value of Altria's JUUL investment was $250 million, which will be recorded in Q1 2023 as a special item in earnings. The transaction reflects Altria's focus on the e-vapor market and its commitment to lead a smoke-free future.

Positive

• Acquisition of non-exclusive global license for JUUL's heated tobacco intellectual property which may enhance Altria's product offerings.
• Strategic decision to pivot from direct investment in JUUL to focusing on intellectual property in the e-vapor space.

Negative

• Significant regulatory and legal challenges facing JUUL may impact Altria's competitiveness in the e-vapor category.
• The $250 million investment in JUUL may not yield expected returns due to ongoing uncertainties.

RICHMOND, Va.--(BUSINESS WIRE)-- Altria Group, Inc. (NYSE:MO) announces that we have exchanged our entire minority economic investment in JUUL Labs, Inc. (JUUL) for a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property (Agreement).

“We believe exchanging our JUUL ownership for intellectual property rights is the appropriate path forward for our business,” said Billy Gifford, Altria’s Chief Executive Officer. “JUUL faces significant regulatory and legal challenges and uncertainties, many of which could exist for many years. We are continuing to explore all options for how we can best compete in the e-vapor category.”

Financial Impact
As of December 31, 2022, the carrying value and estimated fair value of our JUUL investment was $250 million. We will record the financial impact of the Agreement in the first quarter of 2023 and intend to treat any such amounts as a special item and exclude it from our adjusted diluted earnings per share.

Forward-Looking and Cautionary Statements
This release contains certain forward-looking statements with respect to the Agreement, which are subject to various risks and uncertainties. These forward looking statements relate to, among other things, Altria’s expected accounting of the Agreement, the duration of the regulatory and legal challenges and uncertainty faced by JUUL and Altria’s exploration of options to compete in the e-vapor category. Factors that may cause actual results to differ include risks relating to our ability to identify and execute on new opportunities to acquire, develop or commercialize innovative products within the e-vapor space, changes to accounting standards or GAAP, receipt of regulatory authorizations, risks relating to our ability to realize the expected benefits of future partnerships in the expected manner or timeframe, if at all, prevailing economic, market, regulatory or business conditions, or changes in such conditions, and the outcome of any legal proceedings or investigations that may be instituted against us or others related to the transaction. Other risk factors are detailed from time to time in our publicly filed reports, including our Annual Report on Form 10-K for the year ended December 31, 2022. These forward-looking statements speak only as of the date of this press release. We assume no obligation to provide any revisions to, or update, any projections and forward-looking statements contained in this release.

Altria’s Profile
We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision by 2030 is to responsibly lead the transition of adult smokers to a smoke-free future (Vision). We are Moving Beyond Smoking™, leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, our businesses and society.

Our wholly owned subsidiaries include leading manufacturers of both combustible and smoke-free products. In combustibles, we own Philip Morris USA Inc. (PM USA), the most profitable U.S. cigarette manufacturer, and John Middleton Co. (Middleton), a leading U.S. cigar manufacturer. Our smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Company LLC (USSTC), the leading global moist smokeless tobacco (MST) manufacturer, and Helix Innovations LLC (Helix), a leading manufacturer of oral nicotine pouches.

Additionally, we have a majority-owned joint venture, Horizon Innovations LLC (Horizon), for the U.S. marketing and commercialization of heated tobacco stick products and, through a separate agreement, we have the exclusive U.S. commercialization rights to the IQOS Tobacco Heating System® and Marlboro HeatSticks® through April 2024.

Our equity investments include Anheuser-Busch InBev SA/NV (ABI), the world’s largest brewer, and Cronos Group Inc. (Cronos), a leading Canadian cannabinoid company.

The brand portfolios of our tobacco operating companies include Marlboro®, Black & Mild®, Copenhagen®, Skoal® and on!®. Trademarks and service marks related to Altria referenced in this release are the property of Altria or its subsidiaries or are used with permission.

Learn more about Altria at www.altria.com and follow us on Twitter, Facebook and LinkedIn.

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Source: Altria Group, Inc.

FAQ

What did Altria announce regarding JUUL on March 2, 2023?

Altria announced it exchanged its minority investment in JUUL for a non-exclusive global license to JUUL's heated tobacco intellectual property.

How much was Altria's investment in JUUL as of December 31, 2022?

As of December 31, 2022, the carrying value of Altria's JUUL investment was $250 million.

What does this agreement mean for Altria's future in the e-vapor market?

The agreement allows Altria to leverage JUUL's intellectual property while navigating ongoing regulatory challenges in the e-vapor market.

What impact will the JUUL license agreement have on Altria's earnings?

The financial impact of the agreement will be recorded in the first quarter of 2023 as a special item, excluding it from adjusted diluted earnings per share.

Why did Altria decide to exchange its JUUL investment?

Altria decided to exchange its JUUL investment due to JUUL's significant regulatory challenges and uncertainties that could persist for years.