Altria completes acquisition of e-cigarette brand Njoy

Time： 2023-06-02

Altria Group announced that it has completed the acquisition of e-cigarette brand Njoy Holdings. The tobacco giant also updated its full-year 2023 adjusted diluted earnings per share (EPS) guidance related to the deal.

"The closing of this transaction is a transformative step in our goal of moving beyond smoking," said Altria CEO Billy Gifford. "We are pleased to receive antitrust clearance, and we are now fully focused on responsibly accelerating the adoption of Njoy Ace, the only cartridge-based vaping product currently granted marketing authorization by the FDA, among U.S. adult smokers and adult vapers .”

"Our updated full-year 2023 EPS guidance range includes planned investments behind Njoy Ace's U.S. commercialization, reflecting our goal of delivering strong shareholder returns while delivering on our vision."

"We are excited to combine our resources with Njoy's talented team to benefit adult tobacco consumers across the country," said Shannon Leistra, Njoy's new President and CEO.

As a result of the transaction, Altria expects full-year 2023 adjusted diluted EPS to be in the range of $4.89 to $5.03, an increase of 1% to 4% from an underlying adjusted diluted EPS of $4.84 in 2022 .

"Our full-year 2023 adjusted diluted EPS guidance range includes planned investments that support the company's vision, such as (i) ongoing smoke-free product research, development and regulatory readiness expenses, (ii) enhancements to the company's digital consumer engagement systems (iii) support the marketing activities of the company's smoke-free products, including the planned investment behind the commercialization of Ace in the United States," Altria wrote in a release.

Altria's updated guidance range also includes an estimated amortization charge of approximately $50 million through the remainder of 2023 related to intangible assets acquired in the transaction.

E-cigarette marketing and commercialization plan

NJOY e-vapor products will be marketed by NJOY, LLC (NJOY), a wholly owned subsidiary of Altria. NJOY's new President and CEO is Shannon Leistra, who previously served as Senior Vice President and Consumer Experience Officer (CXO) for Altria Client Services LLC. Prior to her CXO role, Ms. Lester held several operating company leadership roles, including USSTC President and CEO. Ms. Leistra also led the integration of Helix and has extensive leadership experience in sales and brand management organizations.

NJOY's products will be distributed by Altria Group Distribution. Altria sales force has extensive U.S. retail coverage and has decades of experience supporting responsible retailing of tobacco products.

The Altria team will immediately focus on optimizing the NJOY ACE ( ACE ) brand proposition, including (i) enhancing ACE's brand equity to increase brand awareness and appeal among adult smokers and adult vapers, and (ii) Identify and address existing store opportunities such as distribution gaps and merchandising improvements.

Altria is working to strengthen NJOY's global supply chain to provide sustainable support for the expected volume growth associated with the long-term ACE expansion plan.

Altria has identified a total of approximately 70,000 U.S. retail stores (including existing stores) for the initial ACE expansion phase. Stores in the initial phase account for about 70 percent of e-cigarette sales and 55 percent of cigarette sales in the U.S. through multichannel and convenience channels.

Financial Impact Related to the Transaction

Altria funded the cash payment for the transaction by approximately $2.75 billion through a combination of $2 billion in term loans, commercial paper and available cash.

Final payments of $1.7 billion (plus interest) are expected to be received from Philip Morris International Inc. (PMI) by July 15, 2023, as part of a $2.7 billion transition agreement for the IQOS Tobacco Heating System®. These proceeds will be used to reduce the outstanding term loan balance.

Beginning in the second quarter of 2023, NJOY's financial results will be reported in the All Other category.

The transaction is expected to be accretive to cash flow in 2025 and accretive to adjusted diluted earnings per share in 2026. Altria also expects the transaction's return on invested capital to exceed the current weighted average cost of capital by 2027.

The previously announced terms of the deal also included an additional cash payment of up to $500 million, contingent on regulatory outcomes for certain NJOY products.

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