Altria rumored to acquire NJOY for up to $3.25B ($2.75B + $500M Earn-Out)
Altria rumored to acquire NJOY for up to $3.25B ($2.75B + $500M Earn-Out)
NJOY has ~3% market share of U.S. e-cig sales. Revenue estimates puts it at $150M in 2022 (15% decline Y/Y). The company sells a battery, refillable pods, and disposable vapes.
Company Overview.
NJOY was founded in 2006 and has continued to serve as a pioneer and thought leader in the vaping category. NJOY holds a contract with the National Institute of Drug Abuse (NIDA) to supply a standard research electronic cigarette for use in independent, government-funded clinical studies. NJOY is one of the largest independent vaping companies in the U.S. (3-5% market share of Nielsen tracked markets) and a leader in the revolution against combustible cigarettes. With a clear mission to Make Smoking History, NJOY offers a range of electronic nicotine products for adult smokers and vapers looking for an alternative.
Transaction Overview.
NJOY (Scottsdale, AZ) is rumored to be in talks with Altria Group (NYSE:MO) regarding a potential acquisition for $3.25 billion on February 27, 2023. The company will receive a contingent payout of $500 million upon the completion of certain regulatory milestones. This would be Altria’s second attempt to buy market share in the vape market, as it previously invested $12.8 billion for 35% of Juul (when it had ~75% market share, before cutting its valuation to $450M recently, which it plans to divest). Altria also ended its non-compete with Juul in September 2022.
A huge point of differentiation for NJOY as it received approval from the US Food and Drug Administration (FDA) to continue selling its tobacco-flavored pods and disposable vape, as part of the regulator’s review of 6.7M+ vaping products. NJOY had Revenue of ~$150M in 2022 (18.0x EV/Revenue pre-earnout) with $115M generated via pod sales. US scan data shows that revenue declined 15% year-over-year in 2022.
After ending its non-compete with Juul, Altria was expected to acquire (rather than build) to gain market share in the U.S. e-cig category (competitor British American Tobacco’s Vuse has ~40% market share). Altria once had its own e-cig (MarkTen) but it never really caught on. Many expected NJOY would be the takeover target.
Altria Sells U.S. rights to IQOS to Philip Morris International for $2.7 Billion. Altria Group entered into an agreement (the Agreement) with a subsidiary of Philip Morris International Inc. (PMI) under which Altria will receive cash payments from PMI totaling ~$2.7 billion (pre-tax) in exchange for assigning exclusive U.S. commercialization rights to the IQOS Tobacco Heating System® effective April 30, 2024.
“We remain committed to creating long-term value through our Vision,” said Billy Gifford, Altria’s Chief Executive Officer. “We believe that this agreement provides us with fair compensation and greater flexibility to allocate resources toward Moving Beyond Smoking.”
IQOS Re-entry into the U.S. IQOS and Marlboro HeatSticks are currently unavailable for sale in the U.S. due to orders imposed by the U.S. International Trade Commission that prohibit importation of IQOS and Marlboro HeatSticks into the U.S.relating to a patent dispute. PMI remains responsible for manufacturing the IQOS system and Marlboro HeatSticks and targets resumption of product supply in the first half of 2023.
Juul. Although Juul is one of the top-selling e-cigarette products in convenience-stores, its sales were hurt following the Food and Drug Administration’s issuance of a marketing denial order (MDO) for Juul’s premarket tobacco product application (PMTA) for several e-cigarette products in tobacco and menthol flavors. At the end of 2022, Juul also settled 5,000+ lawsuits via a consolidation of claims in the U.S. District Court for the Northern District of California—agreeing to pay $1.7 billion in the settlement. It was reported in January that Juul was in talks with Philip Morris International (PMI), Japan Tobacco and Altria Group regarding a potential investment, sale, licensing or distribution deal.
Fundraising History.
April 2012—$31 million of Series A funding from L Catterton and other undisclosed investors, putting company's valuation at $81 million
January 2013—$5 million of Series B funding from undisclosed investors
June 2013—$75 million of Series C venture funding from Fidelity Investments, Sean Parker, Homewood Capital, Founders Fund and Strand Equity, putting company's valuation at $460 million
February 2014—$72 million of Series D funding from Brookside Capital and Morgan Stanley Expansion Capital, putting company's valuation at $1.1 billion. KG Investments and Fidelity Investments also participated
October 2015—In talks to raise an undisclosed amount of Series E venture but the deal was cancelled
September 2016—Filed for Chapter 11 bankruptcy
September 2016—$6 million of debt financing in the form of loan from FLFC Lending on
February 2017—Acquired by Mudrick Capital Management and Homewood Capital through an LBO on for an undisclosed sum. The consortium pledged to pay $300,000 in cash, whatever outstanding obligations are left on the e-cigarette company's debtor-in-possession financing facility, a credit bid representing $29.5 million in second-lien and junior term loan claims and the assumption of the company's first-lien term loan debt. Murdick’s investment is estimated at $40 million for its controlling stake.
September 2018—$49.9 million from Homewood Capital
February 2019—$76.4 million from Bienville Capital and Northwood Ventures
May 2019—$137 million from Evolution VC Partners, Bienville Capital Management and other undisclosed investors
December 2019—$115 million from Northwood Ventures and undisclosed investors
Unkown Date —$22 million of financing from an undisclosed investor
March 2021—$5 million of development capital from ArmaVir Partners, Alpha Wave Global, 44 Capital Investments and other undisclosed investors
July 2022—Rumored to explore $300–500M raise at up to $5 billion valuation. The company last issued convertible debt in 2020 at a $2.8 billion valuation
SALT Talks (July 2020)
Regualtory environment creates oligopoly, PMTA License costs $20M to apply and requires incumbent players to show data. Juul requested to extend deadline for application in 2020, citing COVID
70% of smokers want to quit
Half of the market ($80B on top of $10B spent on vapor product) will be accessible to just 5-7 players
NJOY was the only indepedent with sizable market share in convenience stores and gas stations
👋 Highly Objective is curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party. The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.