Altria Nears Deal for a $12.8 Billion Stake in Juul

(Bloomberg) -- Juul Labs Inc., the company behind the wildly popular e-cigarette, is nearing a deal to sell about a third of itself to tobacco giant Altria Group Inc., people familiar with the negotiations said.

The investment would make Juul the second-most-valuable privately held company after Uber Technologies Inc. and put its products next to Marlboro cigarettes on the top shelf in the U.S., said the people, who asked not to be identified because the information was private.

Altria, which is focused on the U.S. market after spinning off Philip Morris International Inc. in 2008, is set to invest about $12.8 billion in Juul, valuing the e-cigarette maker at roughly $38 billion, the people said. The deal is expected to close before the end of this week, they said.

An agreement hasn’t been reached and talks could still end without one, the people said.

Representatives for Altria and San Francisco-based Juul declined to comment.

At a valuation of $38 billion, the deal would be the second-biggest such investment this year and among the 10 largest of all time, according to data compiled by Bloomberg. The Wall Street Journal reported earlier that the companies were nearing an agreement.

Canadian Cannabis

A deal with Juul would further Altria’s move away from cigarettes and into higher-growth businesses. Its efforts have included an investment in Canadian cannabis company Cronos Group Inc., which gave it a 45 percent stake and an option to take majority control in the future.

For Juul, a tie-up with Altria, with a market value of $97 billion, could more than double its valuation. Just a few months ago, Juul was valued at $16 billion after Tiger Global Management led a $1.2 billion investment. The deal would make Juul more valuable than Airbnb Inc. or Elon Musk’s SpaceX.

Since launching in 2015, Juul has been a runaway success, attracting the ire of parents and regulators who say the company’s devices hook teenagers. Juul has positioned itself as a technology company on a mission to get addicted smokers off tar-burning cigarettes.

Marlboros, Vaping

As part of the agreement, Marlboro will put coupons for Juul’s products inside and outside its cigarette cartons, one of the people said. Altria would also give Juul’s sleek vaporizer pen and pods valuable shelf space in retail stores, the person said. Altria, which only sells its cigarettes in the U.S., would benefit from international exposure as Juul expands to new markets outside the country.

A spokesman for Philip Morris International declined to comment on talks with Juul or how a deal might affect IQOS, a “smoke not burn” device that Altria plans to sell in the U.S. if it gets approved by regulators. Philip Morris is already selling it in some countries.

Juul’s employees will be able to sell their shares as part of the agreement, the people said.

Juul founders Adam Bowen and James Monsees would become the first e-cigarette billionaires if the deal goes through.

Assuming the transaction dilutes the holdings of current shareholders, the founders will each own stakes of 3.6 percent, or $1.36 billion apiece, according to the Bloomberg Billionaires Index. Bowen and Monsees each owned 5.6 percent of Juul after the July funding round that valued each of their holdings at $843 million.

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