Altria bet almost $13 billion on Juul, now it's paying the price with $4.1 billion in impairment charges
- Altria, the cigarette maker, felt the shocks from Juul's onslaught of legal cases after it took a $4.1 billion impairment charge during its fourth quarter.
- Altria tried to move in a new direction when they made a $12.8 billion investment in Juul in December 2018.
- Altria anticipates the cigarette industry volume to drop by an adjusted rate of 4% to 6% by the end of this year.
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Altria, the Richmond, Virginia-based cigarette company, took a $4.1 billion impairment charge during the fourth quarter for its investment in the e-cigarette company Juul, according to an Altria press release Thursday.
The charge is due to the increasing number of legal cases Juul is involved with and the expectation that the number of cases will continue to grow, the release said.
Altria invested $12.8 billion in Juul in December 2018 in an attempt to expand sales beyond traditional cigarettes as smoking rates decline, according to a CNBC report. The company said it expects the cigarette industry volume to decline by an adjusted rate of 4% to 6% in 2020.
Altria says it and Juul agreed to adjust the terms of their agreement: Altria will help Juul handle regulatory matters such as pre-market tobacco product applications. But all other services from the original investment agreement will be discontinued by March 2020.
For its part, Juul agreed to restructure its board of directors if approved by the Federal Trade Commission, and release Altria from its non-compete agreement if Juul is banned from selling e-vapor products in the US for at least a year - or if Altria's Juul stake dips below 10% of its $12.8 billion investment.
"This agreement is a continuation of the reset initiated by JUUL's leadership team." said CEO Howard Willard. "We look forward to working with the company under this structure to support JUUL's commitment to working with regulators and submitting the best possible PMTA."