Altria CEO Steps Down From the Marlboro Cigarette Maker--2nd Update
April 17 2020 - 12:04PM
Dow Jones News
By Jennifer Maloney
Howard Willard, the chief executive of Altria Group Inc., has
stepped down from the Marlboro maker after two rocky years on the
job that resulted in big losses on an investment in Juul Labs
Inc.
Mr. Willard, who made a $12.8 billion investment the in
e-cigarette startup in 2018, had temporarily stepped aside in March
as CEO after being diagnosed with Covid-19.
The 56-year-old's exit comes amid pressure from investors over
the Juul investment and weeks after the U.S. government filed an
antitrust suit against Altria to unwind the deal. Altria shares,
down about 30% over the past year, rose 2% in Friday trading.
He was replaced this week by finance chief Billy Gifford. Mr.
Gifford had been named acting CEO in March after his boss became
ill. Mr. Willard is now recovering, the company said.
In an interview in March, Mr. Gifford said the company was
looking back at consumer behavior during the last recession as a
guide for how the tobacco industry might be affected by the
pandemic.
"People wanted to continue to smoke," he said. "They wanted to
be able to go about their normal daily patterns."
He said supermarkets and convenience stores, where many people
buy their cigarettes, have largely remained open. But he expected
the crisis to slow down the rollout of IQOS, a heated tobacco
device that Altria launched in the U.S. last year, because the
product is sold in stand-alone stores where the sales staff coach
consumers, one-on-one, on how to use it.
Altria said it was splitting the roles of chairman and CEO.
Thomas Farrell, a board member and the CEO of Dominion Energy Inc.,
was named chairman.
Mr. Willard helped set the course for Altria's mission to "lead
the transition of adult smokers to a noncombustible future, Mr.
Farrell said in a statement. "Our election of Billy as the next CEO
reflects the board's belief that his collaborative leadership
style, strategic mind-set and deep financial and industry expertise
are right to lead Altria towards that future."
Earlier this year, Altria's board decided not to pay Mr. Willard
a bonus for 2019, citing the company's performance and two big
write-downs on the Juul investment that totaled more than $8
billion. Mr. Willard also pursued unsuccessful merger talks with
rival Philip Morris International Inc.
As part of his exit, the board has agreed to pay Mr. Willard a
cash payment of $8.8 million in lieu of stock awards granted in
2018 and 2019, according to a securities filing. He will also
receive a $537,900 payment for 2020.
Mr. Willard took Altria's top job in May of 2018. He quickly set
out to remake the tobacco giant where he had worked for more than
two decades. He scrapped Altria's e-cigarette efforts and engaged
in discussions to buy a stake in Juul, a vaping startup that was
taking Altria's smokers.
The investment valued Juul at $38 billion. But since then, the
e-cigarette maker has been battered by lawsuits, regulatory
crackdowns and investigations into whether it marketed its products
to children and teenagers. Blamed for a surge in underage vaping,
Juul voluntarily pulled most of its flavors from the U.S. market
and scaled back its international expansion.
In January, Mr. Willard said he was "highly disappointed in the
performance of our Juul investment." He cited a number of
surprises, including a vaping-related lung illness that prompted
U.S. health officials to warn consumers last year not to use
e-cigarettes before they determined the illnesses were linked not
to e-cigarettes but to vaping devices containing marijuana extracts
and vitamin E oil.
He was pressed on the wisdom of the deal in February by
shareholders and analysts in a private session at an analyst
conference in Florida, according to a person who attended the
event. Mr. Willard responded by noting that Altria had recently
revised its agreement with Juul and the new deal had the full
support of Altria's board, this person said.
Under the revised agreement, Altria is no longer providing
marketing and retail distribution for Juul as the companies had
originally agreed. The new deal also gives Altria the option to
launch its own e-cigarettes. At the end of December, Altria valued
Juul at $12 billion and its own stake at $4.2 billion.
The Federal Trade Commission earlier this month sued Altria to
unwind the investment in Juul, accusing the Marlboro maker of
violating federal antitrust laws. Altria said it disagreed with the
government and would defend its investment.
Write to Jennifer Maloney at jennifer.maloney@wsj.com
(END) Dow Jones Newswires
April 17, 2020 11:49 ET (15:49 GMT)
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