Altria Announces Completion of Njoy Acquisition

Today, on June 2, Altria Group announced that it has completed the acquisition of the e-cigarette brand Njoy Holdings. The tobacco giant also updated its guidance for the full year 2023 adjusted diluted earnings per share (EPS) related to the transaction.

"The completion of this transaction is a transformative step in our goal to go beyond smoking," said Altria CEO Billy Gifford. "We are pleased to have received antitrust clearance, and we are now fully focused on responsibly accelerating the adoption of Njoy Ace among adult smokers and adult e-cigarette users in the U.S. Njoy Ace is currently the only pod-based electronic vapor product authorized for marketing by the FDA."

"Our updated 2023 EPS guidance range includes planned investments behind the commercialization of Njoy Ace in the U.S., reflecting our goal of delivering strong shareholder returns while achieving our vision."

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

As a result of the transaction, Altria expects its full-year adjusted diluted EPS for 2023 to be in the range of $4.89 to $5.03, representing a growth rate of 1% to 4% over the adjusted diluted EPS of $4.84 in 2022.

"Our 2023 full-year adjusted diluted EPS guidance range includes planned investments supporting the company's vision, such as (i) ongoing research, development, and regulatory preparation costs for smoke-free products, (ii) enhancements to the company's digital consumer engagement systems, and (iii) marketing activities supporting the company's smoke-free products, including planned investments behind the U.S. Ace commercialization," Altria wrote in a press release.

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

E-cigarette Marketing and Commercialization Plans

NJOY electronic vapor products will be sold by Altria's wholly-owned subsidiary NJOY, LLC (NJOY). The new President and CEO of NJOY is Shannon Leistra, who previously served as Senior Vice President and Chief Experience Officer (CXO) of Altria Client Services LLC. Before her role as CXO, Ms. Leistra held leadership positions in several operating companies, including President and CEO of USSTC. 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's distribution company. Altria's sales force has a broad reach across U.S. retail and has decades of experience supporting the 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 e-cigarette users, and (ii) identifying and addressing existing opportunity stores, such as distribution gaps and improvements in merchandise sales.

Altria is working to strengthen NJOY's global supply chain to sustainably support the anticipated 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 phase of the ACE expansion. The initial phase stores account for approximately 70% of e-cigarette sales and 55% of cigarette sales in the U.S. multi-channel and convenience channels.

Financial Impact of the Transaction

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

It is expected to receive a final payment of $1.7 billion (plus interest) from Philip Morris International Inc. (PMI) by July 15, 2023, as part of a total of $2.7 billion for the IQOS Tobacco Heating System? transition agreement. These proceeds will be used to reduce the outstanding balance of the term loan.

Starting in the second quarter of 2023, NJOY's financial performance will be reported in all other categories.

The transaction is expected to increase cash flow in 2025 and adjusted diluted EPS in 2026. Altria also expects that by 2027, the return on invested capital from the transaction will exceed the current weighted average cost of capital.

Previously announced transaction terms also include up to $500 million in additional cash payments, contingent on certain regulatory outcomes for specific NJOY products.