Altria: Business Update

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NJOY acquisition – confirmed1

Altria acquires NJOY for ~$2.75Bn in cash. The Transaction terms also include additional $500Mn in cash payments that are contingent on the

– MGO for the ACE Menthol pods ($125Mn for each concentration: 2.4% and 5.0%)

– MGO for the access-restriction technology paired ACE pods (PMTA yet to be filled; $125Mn for each version: non-tobacco or menthol flavored)

Altria expects the Transaction to be accretive to cash flow within two years and accretive to EPS within three years. Altria estimates the return on invested capital for the Transaction to exceed its weighted-average cost of capital within 3-4 years (- despite also estimating that over the next 10 years, total US e-vapor volumes will grow at a low single-digit CAGR)

NJOY in brief

– NJOY received 6 of the 23 MGOs issued by the US FDA so far

ACE, a pod-based e-cigarette and NJOY’s leading brand (with 85% weight in total shipments), is available in 33,000 US retail stores. In 2022, ACE pods had ~3% SoM (market: ~$7Bn in retail sales)

– NJOY also sells its NJOY DAILY, a disposable e-cigarette, in 23,000 retail stores.

JUUL divestment2

March 3, 3023: Altria exchanges its entire minority economic investment in JUUL Labs for a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property. As of Dec 31, 2022, the carrying/estimated fair value of JUUL investment was $250Mn. Altria will record the financial impact of this transaction in Q1 2023.

NJOY acquisition – speculated3

Feburary 27, 2023: Altria is nearing a deal to buy e-cigarette company NJOY for $2.75Bn plus an additional $0.5Bn earn-out if certain regulatory milestones are met.

In the three months to mid-February 2023, NJOY has 2.7% share in the US e-cigarette market based on the NielsenIQ data. NJOY has 6 [PMTA] marketing orders granted by the US FDA so far: ACE device, 3 tobacco-flavored pods [to be used with the ACE device], 2 tobacco-flavored Daily disposable e-cigarettes. Based on NJOY’s $150Mn estimated revenue, the price tag is 18-22x revenue.

NJOY, one of the first e-cigarette companies in the US, filed for Chapter 11 bankruptcy in 2016. The financially restructured, NJOY LLC raised fresh capital equity, mostly from Mudrick Capital Management, and acquired the assets of NJOY. In July 2022, NJOY hired bankers for a possible sale of the company for up to $5Bn. NJOY was also exploring the option to raise $300-500Mn to stay private and go for an IPO.

Altria’s earlier acquisitions:

December 2018: 35% stake in JUUL for $12.8Bn (based on Juul’s $1.5Bn estimated revenue, price tag: 24x revenue)

December 2018: 45% stake in Cronos Group, a cannabinoid company, for CAD$2.4Bn/US$1.8Bn (including a later abandoned warrant to increase its stake by another ~10%, exercisable until March 2023 at a price of CAD$19/share)

Feburary 2014: Green Smoke, an e-cigarette startup, for $110Mn (discontinued following the Juul acquisition)

References:

  1. https://investor.altria.com/press-releases/news-details/2023/Altria-Announces-Definitive-Agreement-to-Acquire-NJOY-Holdings-Inc/default.aspx ↩︎
  2. https://investor.altria.com/press-releases/news-details/2023/Altria-Exchanges-Minority-Stake-in-JUUL-Labs-for-Heated-Tobacco-Intellectual-Property-Rights/default.aspx ↩︎
  3. https://www.nasdaq.com/articles/e-cigarette-maker-njoy-hires-bankers-for-possible-sale ↩︎

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