U.S FTC to push Altria into selling its 35% stake in Juul Labs

U.S FTC to push Altria into selling its 35% stake in Juul Labs

  • US FTC seeks to push Altria into selling its £10.34 billion investment in Juul Labs.
  • FTC's director Ian Conner says Altria and Juul collaboration hurts competition.
  • Altria's CEO Howard Willard tested positive for Coronavirus in late March.

In a statement on Wednesday, United States Federal Trade Commission announced to have lodged a complaint against Altria Group (NYSE:MO) seeking the Marlboro maker to sell the investment that it made in Juul Labs Inc. Juul is an American company that manufactures e-cigarettes.

Altria had made a £10.34 billion investment in Juul to purchase a 35% stake in the company in December 2018. Owing to multiple write-downs in 2019, the investment is currently valued at £3.39 billion as the e-cigarette maker continues to face regulatory investigations and litigation for its role in promoting teenage vaping in the U.S.

Juul Suspended Production of Mint And Mango Flavored E-Cigarettes

Amidst the rising pressure from U.S lawmakers and regulators, Juul suspended production of a few of its popular e-cigarette flavors including mint and mango. The company also laid off hundreds of jobs as it restructured following a change in management.

Juul Labs and Altria were previously in firm competition with each other as e-cigarette manufacturers. Altria’s MarkTen had a reputation of 2nd most popular e-cigarette a few years ago. According to the FTC, as Juul dominated the market in 2018, Altria signed a deal with its rival to quit the competition. It, however, received a 35% ownership in Juul in return.  

Altria discontinued its MarkTen brand only a few weeks ahead of its announcement that it had bought a substantial stake in Juul Labs. According to director Ian Conner of the FTC’s Bureau of Competition:

“Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul’s profits.”

Juul refrained from commenting on the news at this stage. Altria, on the other hand, said it plans on defending its investment vigorously. Altria’s executive vice president, Murray Garnick, stated on Wednesday:

“We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts.”

Altria’s CEO Tests Positive For Coronavirus

As part of the ongoing regulatory proceeding, Juul is required to prove by the end of the year that its products help smokers quit and therefore, its public health benefits outweigh the risk of nicotine addiction in non-users including teenagers.

Altria currently has the largest investment in Juul and an FTC forced divestment will potentially threaten its financial stature. Altria will also have to look for alternative products in such an event.

In separate news, Altria’s CEO Howard Willard was reported to have tested positive for COVID-19 in late March. CFO William Gifford Jr. has taken over the role in his absence.

At £29 per share, Altria is currently a little under 30% down year to date in the stock market.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.

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