- Altria to receive cash payments from Philip Morris
International of approximately $2.7 billion in exchange for
assigning exclusive U.S. commercialization rights to the IQOS
system effective April 30, 2024.
- Altria gains greater flexibility to allocate resources toward
Moving Beyond Smoking.
Altria Group, Inc. (NYSE:MO) today announced that a subsidiary
has entered into an agreement (the Agreement) with a subsidiary of
Philip Morris International Inc. (PMI) under which Altria will
receive cash payments from PMI totaling approximately $2.7 billion
(pre-tax) in exchange for assigning exclusive U.S.
commercialization rights to the IQOS Tobacco Heating System®
effective April 30, 2024.
“We remain committed to creating long-term value through our
Vision,” said Billy Gifford, Altria’s Chief Executive Officer. “We
believe that this agreement provides us with fair compensation and
greater flexibility to allocate resources toward Moving Beyond
In 2013, we entered into a series of agreements with PMI related
to innovative tobacco products, which included exclusive U.S.
commercialization rights of PM USA, an Altria subsidiary, to the
IQOS system. PM USA’s commercialization rights were subject to an
initial five-year term, which began when the system received
authorization from the U.S. Food and Drug Administration (FDA) in
April 2019 and continued through April 2024. As part of the 2013
agreement, PM USA had the right to maintain exclusive U.S.
commercialization rights upon achieving an initial milestone by
April 2022. Upon achieving additional milestones, PM USA had the
option to renew for an additional five-year term through April
2029. We believe that PM USA met each of these milestones, but PMI
disagreed with our position. The parties were unable to reach a
long-term agreement and decided to enter into the Agreement to
transition and ultimately conclude their relationship.
We received a payment from PMI of $1.0 billion upon entry into
the Agreement. Under the terms of the Agreement, PMI is obligated
to make an additional payment of $1.7 billion (plus interest) by
July 2023 for a total cash payment of approximately $2.7 billion
(pre-tax). We expect to use the cash proceeds for several items,
which may include investments in pursuit of our Vision, debt
repayment, share repurchases and general corporate purposes. Share
repurchases depend on marketplace conditions and other factors and
remain subject to the discretion of our Board of Directors.
We expect to record the $2.7 billion pre-tax transaction amount
as a deferred gain on our consolidated balance sheet in the fourth
quarter of 2022. This gain will be recognized in earnings when we
assign our rights to the IQOS system.
IQOS Re-entry into the U.S.
IQOS and Marlboro HeatSticks are currently unavailable for sale
in the U.S. due to orders imposed by the U.S. International Trade
Commission that prohibit importation of IQOS and Marlboro
HeatSticks into the U.S. relating to a patent dispute. PMI remains
responsible for manufacturing the IQOS system and Marlboro
HeatSticks and targets resumption of product supply in the first
half of 2023. If supply of FDA-authorized product is available to
us before May 2024, PM USA has the option to reintroduce the IQOS
system and Marlboro HeatSticks for sale in the U.S. On April 30,
2024, U.S. commercialization rights to the IQOS system will
transition to PMI. PMI will not have access to the Marlboro brand
name or other brand assets, as PM USA owns the Marlboro trademark
in the U.S.
Altria's Continued Commitment to Tobacco Harm
We remain committed to our Vision to responsibly lead the
transition of adult smokers to a smoke-free future. We believe in a
portfolio approach to tobacco harm reduction and expect to compete
in the major smoke-free categories. We have reinvested into our
internal product development system and we expect to finalize
designs for two smoke-free products, including a heated tobacco
product, by the end of 2022.
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
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 rapidly growing manufacturer of oral nicotine
pouches. Additionally, we have an equity investment in JUUL Labs,
Inc. (JUUL) and have exclusive U.S. commercialization rights to the
IQOS Tobacco Heating System® and Marlboro HeatSticks® through April
We also own equity investments in 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
Learn more about Altria at www.altria.com and follow us on
Twitter, Facebook and LinkedIn.
Forward-Looking and Cautionary Statements
This release contains certain forward-looking statements with
respect to the IQOS transition agreement with PMI, which are
subject to various risks and uncertainties. Such forward looking
statements relate to, among other things, Altria’s receipt of
future cash payments, the anticipated use of such proceeds, future
availability and supply of IQOS products and the design and
development of future products. Factors that may cause actual
results to differ include receipt of required regulatory
authorizations to reintroduce the IQOS system and Marlboro
HeatSticks for sale in the U.S. and for any future products, risks
relating to our ability to realize the expected benefits of the
transaction in the expected manner or timeframe, if at all,
prevailing economic, market, regulatory or business conditions, or
changes in such conditions, negatively affecting the parties,
changes in market and other conditions resulting in alternative
uses of proceeds or unanticipated delays in the design and
development of future products, the outcome of any legal
proceedings or investigations that may be instituted against the
parties or others related to the transaction, significant changes
in price, availability or quality of raw materials or component
parts, including as a result of changes in macroeconomic, climate
and geopolitical conditions, and the risk of an extended disruption
at a facility of, or of service by, a supplier, distributor or
distribution chain service provider of our subsidiaries or of PMI.
Other risk factors are detailed from time to time in Altria’s
quarterly reports on Form 10-Q and most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission. These
forward-looking statements speak only as of the date of this press
release. Altria assumes no obligation to provide any revisions to,
or update, any projections and forward-looking statements contained
in this release.
version on businesswire.com: https://www.businesswire.com/news/home/20221019005987/en/
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