Altria Deal for Stake In Juul Is Stuck In Antitrust Review -- WSJ

Date : 01/18/2020 @ 8:02AM
Source : Dow Jones News
Stock : Altria Group Inc (MO)
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Altria Deal for Stake In Juul Is Stuck In Antitrust Review -- WSJ

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By Jennifer Maloney and John D. McKinnon 

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (January 18, 2020).

Altria Inc.'s investment in e-cigarette startup Juul Labs Inc. remains in limbo more than a year after the deal was made, as federal antitrust officials continue to probe the Marlboro maker's control of shelf space in stores, according to people familiar with the matter.

Altria, the largest U.S. tobacco company, paid $12.8 billion for a 35% stake in the e-cigarette market leader in December 2018. Two weeks before announcing the deal, Altria closed its e-cigarette business. As part of the tie-up, Altria agreed to put Juul coupons on cigarette packs, send Juul promotions to its mailing list of cigarette smokers and give Juul the shelf space that Altria's MarkTen e-cigarettes had occupied. Juul has since taken some of that shelf space.

Juul has come under increasing regulatory and financial pressure since the investment as it has been blamed for a surge in underage vaping in the U.S. Juul voluntarily halted sales of its sweet and fruity-flavored refill pods, which are popular among teenagers, and has said it is working to repair its damaged relationship with regulators.

As part of the Federal Trade Commission review, Altria and Juul in October agreed not to complete some aspects of the deal until at least early January, pending signoff from the agency, but that date passed last week without an approval. The agency is still conducting depositions, some of the people familiar with the matter said.

Until the review is complete, Altria can't convert its nonvoting shares to voting shares, appoint representatives to Juul's board or count Juul's earnings toward its own earnings.

FTC staffers are looking at Altria's acquisition of additional retail shelf space in convenience stores and other outlets for its e-cigarette products even as it planned to wind down that business and take a stake in Juul, according to one of the people familiar with the matter.

Big tobacco companies traditionally haven't paid retailers for shelf space for their cigarettes. But Reynolds American Inc., the second-largest U.S. tobacco company, began paying retailers in 2013 to secure shelf space for its Vuse e-cigarettes. As the e-cigarette market boomed with competitors vying for space, Altria followed, spending about $100 million on the effort in 2018, people familiar with the matter said. Altria offered retailers cash and display fixtures in exchange for a commitment that its e-cigarettes would occupy prime shelf space for at least two years.

In the antitrust review, the FTC also has sought information from Altria on its role in the September resignation of Juul Chief Executive Kevin Burns and the appointment of his successor, Altria executive K.C. Crosthwaite, according to Altria.

The Juul investment has been problematic for the tobacco company. In October, Altria took a $4.5 billion write-down on the company and now holds its stake at a price that values the startup at roughly $24 billion, down from its $38 billion valuation when Altria made its investment in 2018.

The FTC could seek to force changes to the deal to resolve any antitrust concerns, or it could try to block the transaction outright. Most antitrust concerns are resolved through settlements instead of litigation.

The FTC is conducting a separate investigation into whether Juul used influencers and other marketing to appeal to minors. That probe predates the antitrust review. Several attorneys general are investigating Juul, and the e-cigarette maker is the subject of a criminal probe being conducted jointly by federal prosecutors in California and the Food and Drug Administration, according to people familiar with the matter.

Write to Jennifer Maloney at and John D. McKinnon at


(END) Dow Jones Newswires

January 18, 2020 02:47 ET (07:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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