Why Altria Is Buying NJOY For About $2.75 Billion In Cash (MO)

By Amit Chowdhry ● Mar 7, 2023
  • Altria Group recently announced it is buying NJOY Holdings, Inc. (NJOY) for approximately $2.75 billion in cash payable at closing. These are the details.

Altria Group, Inc. (NYSE: MO) announced that they have entered into a definitive agreement to acquire NJOY Holdings, Inc. (NJOY) for about $2.75 billion in cash payable at closing. The deal terms include an additional $500 million in cash payments that are contingent upon regulatory outcomes with respect to certain NJOY products.

U.S. E-Vapor Marketplace Details

  1. The e-vapor category is the largest smoke-free category in the U.S. In 2022, the e-vapor category:
    1. included nearly 14 million U.S. adult tobacco consumers (ATCs), including 9.5 million exclusive adult vapers;
    2. generated about $7 billion in U.S. retail sales; and
    3. represented about 15% of total estimated equivalized U.S. tobacco volumes and more than 50% of total estimated equivalized smoke-free tobacco volumes.
  2. The U.S. Food and Drug Administration (FDA) regulates the e-vapor category. And the vast majority of the e-vapor products on the market today have not received a marketing granted order (MGO) from the FDA. As long as these products have a pre-market tobacco product application (PMTA) pending, the FDA is allowing the products to remain on the market subject to its enforcement discretion.
  3. Significant progress has been made toward reducing underage use of e-vapor products. Specifically:
    1. The 2022 the University of Michigan Monitoring the Future survey estimates youth nicotine-vaping prevalence to be 13.8%, a nearly 24% reduction from its 2019 peak of 18.1%; and
    2. The 2022 U.S. Center for Disease Control National Youth Tobacco Survey (NYTS) estimates that current e-cigarette use among middle and high school students to be 9.4%, a 53% reduction from its 2019 peak of 20%, though caution is warranted when comparing findings to previous years due to the impact of the COVID-19 pandemic on the survey’s methodology. The latest NYTS cited Puff BarVuseHyde and SMOK as the most often used usual brand among middle and high school e-cigarette users.

NJOY Product Portfolio

  • Currently, the FDA has issued MGOs for 23 e-vapor products and devices. In 2022, NJOY received MGOs for the following six products:
    1. NJOY ACE e-vapor device;
    2. NJOY ACE POD, rich tobacco flavor, 5.0% nicotine concentration;
    3. NJOY ACE POD, classic tobacco flavor, 5.0% nicotine concentration;
    4. NJOY ACE POD, classic tobacco flavor, 2.4% nicotine concentration;
    5. NJOY DAILY EXTRA, rich tobacco flavor, 6.0% nicotine concentration; and
    6. NJOY DAILY, rich tobacco flavor, 4.5% nicotine concentration.

NJOY also sells menthol-flavored e-vapor products. NJOY submitted PMTAs for these products prior to the FDA deadline of September 9, 2020, and those PMTAs remain under FDA review.

  1. NJOY ACE (ACE), NJOY’s leading brand, is a pod-based e-vapor product that is only available in about 33,000 U.S. retail stores.
    1. ACE represented about 85% of NJOY’s 2022 total retail shipments.
    2. Due to NJOY’s small sales force and the limited distribution and visibility of ACE, ATC awareness of the brand is low. As a result, the 2022 retail share of ACE pods in U.S. multi-outlet and convenience stores was about 3%.
    3. Altria’s research indicates that once adult smokers and adult vapers try ACE, it performs on par with the leading e-vapor brand.
    4. About 40% of ACE pod sales were tobacco-flavored in 2022, a higher percentage than the leading two e-vapor brands and the overall e-vapor category.
  2. NJOY also sells its NJOY DAILY disposable e-vapor products in about 23,000 U.S. retail stores.
  3. NJOY-branded products were not included among the most often used usual brand among middle and high school e-cigarette users in the 2022 NYTS.
  4. NJOY also has access-restriction technology in development for its devices. This technology uses Bluetooth® connectivity to authenticate the user before unlocking the device.
  5. NJOY has a strong commercial relationship with Shenzhen Smoore Technology Limited (Smoore), a leading innovator in the e-vapor space, for the development and manufacturing of its e-vapor products.

Deal Assumptions

  1. Altria continues to believe that the U.S. e-vapor category will undergo a multi-year transition period as the FDA makes marketing determinations on the significant number of currently pending PMTAs for tobacco-derived and synthetic nicotine e-vapor products. Altria assume that over the next few years, the FDA will issue marketing determinations on all currently pending PMTAs. Altria also assumes that the FDA exercises appropriate enforcement actions against non-compliant manufacturers, including those that continue to sell products that received marketing denial orders and those who failed to file PMTAs.
  2. Altria estimate that over the next 10 years, total U.S. e-vapor volumes will grow at a low single-digit compounded annual growth rate.
  3. Altria believe the strengths of Altria’s commercial resources can benefit adult smokers and adult vapers and expand competition in the stores where ACE has not been distributed while improving visibility in the stores that currently sell ACE. Altria’s sales force has significant retail coverage, servicing over 200,000 U.S. retail stores, and decades of experience supporting the responsible retailing of tobacco products. Altria believes adding NJOY’s FDA-authorized products into this system will benefit ATCs across the country.

Deal-Related Financial Implications

  1. Under the terms of the deal, Altria will pay NJOY about $2.75 billion in cash upon closing. The deal terms also include additional contingent cash payments of up to $500 million as follows:
    1. NJOY will receive $250 million if the FDA issues an MGO for the NJOY ACE POD, menthol flavor, 5.0% nicotine concentration product either alone or in combination with the NJOY ACE POD, menthol flavor, 2.4% nicotine concentration product.
      1. If the FDA issues an MGO for the NJOY ACE POD, menthol flavor, 2.4% nicotine concentration product but not the NJOY ACE POD, menthol flavor, 5.0% nicotine concentration product, NJOY will receive a payment of $125 million.
    2. NJOY is currently preparing PMTA filings for two non-tobacco or menthol-flavored ACE pods that would be paired with NJOY’s access-restriction technology. If the FDA issues an MGO for either of these applications, NJOY will receive a payment of $125 million (total contingent payment of $250 million if the FDA authorizes both PMTAs).
  2. Altria expects the Transaction will be accretive to cash flow within two years of closing and accretive to Altria’s adjusted diluted earnings per share (EPS) within three years of closing. Altria also estimates the return on invested capital for the Transaction to exceed Altria’s current weighted-average cost of capital within three to four years of closing.
  3. Altria has multiple sources of funding available for the Transaction. Altria’s core tobacco businesses continue to be highly cash-generative, and Altria has strong access to the credit markets and committed short-term bank financing. Additionally, Altria entered into a $2.7 billion transition agreement last year with Philip Morris International Inc. (PMI) for the IQOS Tobacco Heating System®. Altria received a $1 billion payment from PMI in the fourth quarter of 2022 and expects to receive a payment of $1.7 billion (plus interest) from PMI by July 15, 2023.

Closing Conditions

The deal is subject to customary closing conditions, including reporting requirements under the Hart-Scott-Rodino Act.


“We believe we can responsibly accelerate U.S. adult smoker and competitive adult vaper adoption of NJOY ACE in ways that NJOY could not as a standalone company. We believe the strengths of our commercial resources can benefit adult tobacco consumers and expand competition. We are also excited to welcome NJOY’s talented employees to Altria at closing.”

“As a result of this transaction, Altria’s enhanced smoke-free portfolio will include full global ownership of products and technologies across the three largest smoke-free categories and a joint venture with JT Group for the U.S. commercialization of heated tobacco stick products.”

  • Billy Gifford, Altria’s Chief Executive Officer

“We are excited to add NJOY’s e-vapor intellectual property as a new platform that we believe we can build on to help more adult smokers transition to smoke-free alternatives.”

  • Olivier Houpert, Altria’s new Chief Innovation and Product Officer.