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Altria Completes $2.75B NJOY Acquisition

Plans call for increasing awareness and appeal among adult smokers and adult vapers through NJOY ACE expansion.

RICHMOND, Va. — Altria Group Inc.'s acquisition of NJOY Holdings Inc. is officially closed.

Just one week ago, Altria said it would move forward with the deal to acquire NJOY after the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired, which left no requirements for further regulatory review by federal antitrust authorities.

The manufacturer entered into a definitive agreement to acquire NJOY Holdings Inc. for approximately $2.75 billion in cash on March 6.

"The completion of this transaction is a transformative step in our goal of 'Moving Beyond Smoking,'" said Altria CEO Billy Gifford. "We are pleased to have received antitrust clearance and we are now fully focused on responsibly accelerating U.S. adult smoker and adult vaper adoption of NJOY ACE, currently the only pod-based e-vapor product to receive marketing authorization from the FDA.

"Our updated 2023 full-year EPS guidance range includes planned investments behind the U.S. commercialization of NJOY ACE and reflects our goal to deliver strong shareholder returns while making progress toward our vision," he added.

E-Vapor Marketing & Commercialization Plans

NJOY e-vapor products will be marketed by NJOY LLC, a wholly owned subsidiary of Altria, and NJOY products will be distributed by Altria Group Distribution Co.

Former Altria Client Services LLC Senior Vice President and Consumer Experience Officer Shannon Leistra will serve as president and CEO of NJOY. Leistra previously held various operating company leadership positions, including president and CEO of U.S. Smokeless Tobacco Co., and led the integration of Helix.

"We are excited to combine our resources with NJOY's talented team to benefit adult tobacco consumers across the country," said Leistra.

[Read more: Altria Survey: Majority of Americans Support Tobacco Harm Reduction]

The Altria and NJOY teams will immediately focus on optimizing the NJOY ACE brand proposition, including enhancing ACE's brand equity to increase awareness and appeal among adult smokers and adult vapers, and identifying and addressing opportunities in existing stores, such as distribution gaps and merchandising improvements.

The company is currently working to strengthen NJOY's global supply chain to provide sustainable support for the anticipated volume increase associated with the long-term ACE expansion plans. Altria identified a total of approximately 70,000 U.S. retail stores, including existing stores, for the initial ACE expansion phase. The stores in the initial phase represent approximately 70 percent of e-vapor volume and 55 percent of cigarette volume sold in the U.S. multioutlet and convenience channel.

Transaction Details

Altria funded the $2.75 billion acquisition through a combination of a $2 billion term loan, commercial paper and available cash. The company expects to receive a final payment of $1.7 billion, plus interest, from Philip Morris International Inc. by July 15, as a part of the total $2.7 billion transition agreement for the IQOS Tobacco Heating System. Altria will use these proceeds to reduce the outstanding term loan balance.

Beginning in the second quarter of 2023, financial results for NJOY will be reported within the "All Other" category. The company expects the deal to be accretive to cash flow in 2025 and accretive to adjusted diluted EPS in 2026. Additionally, Altria expects the return on invested capital for the transaction to exceed its current weighted average cost of capital by 2027.

[Read more: Altria to Conduct Equity & Civil Rights Audit]

Previous terms of the NJOY deal also include up to $500 million in additional cash payments that are contingent upon regulatory outcomes with respect to certain NJOY products.

Richmond-based Altria's wholly owned subsidiaries include Philip Morris USA Inc. and John Middleton Co. Its smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Co. LLC and Helix Innovations LLC.

Additionally, Altria has a majority owned joint venture, Horizon Innovations LLC, and, through a separate agreement, has the exclusive U.S. commercialization rights to the IQOS Tobacco Heating System and Marlboro HeatSticks through April 2024.

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