Altria Group Inc MO-N said on Monday it would buy e-cigarette startup NJOY Holdings Inc for about $2.75-billion in cash, in a fresh bet by the Marlboro maker on the e-cigarette market after losing billions through its investment in Juul.
Big tobacco firms are investing heavily in traditional cigarette alternatives as smoking rates decline globally, but the fast-growing e-cigarette category has faced tough regulatory scrutiny over underage usage and health concerns.
While NJOY has a much smaller market share in the United States compared to Juul, it has six products that have received full approval for sale from the U.S. Food and Drug Administration.
Juul is still seeking approval of its products and is under the threat that the health regulator could pull its products off shelves nationwide as it briefly did last year.
Altria on Friday said it had exchanged its investment in Juul, last valued at $250-million, for some of the once red-hot vaping company’s heated tobacco intellectual property.
Altria’s stake in Juul, valued at $12.8-billion in 2018, had raised antitrust concerns and the Federal Trade Commission filed a complaint in April 2020. But an administrative law judge dismissed the complaint in February 2022.
The tobacco giant said it had multiple sources to fund the NJOY deal, including cash from a $2.7-billion agreement it entered with Philip Morris International Inc last year for the IQOS Tobacco Heating System.
NJOY’s products include Ace Pods – currently the only pod-based e-vapor product with market authorizations from the FDA – and disposable e-cigarettes under the NJOY Daily brand.
The deal will include an additional $500-million in cash payments based on regulatory decisions related to other NJOY products, Altria said.
Vapor products was a $7.84-billion market in the United States in 2021, up from $4.6-billion in 2017, according to Euromonitor International, and is projected to rise to $9.46-billion by 2025.