Altria Group Inc. (NYSE: MO) has bought a 35 percent stake in Juul Labs Inc. for $12.8 billion. The deal values Juul at $38 billion, more than double its value since a previous investment in July. According to the terms of the deal, Altria will hold a third of Juul’s board seats, but Juul will continue to operate independently.
According to people familiar with the matter, the deal contains a standstill agreement. That means that Altria has agreed that it won’t increase its ownership share of Juul and that it will not sell or transfer its shares for six years. The agreement also states that Juul will also be the only e-cigarette company Altria works with while their partnership stands and that Altria will place Juul’s products next to its cigarettes on retail shelves.
Juul employees stand to receive a $2 billion dividend from Altria as part of the tobacco giant’s deal. Juul is receiving the lump sum payout as part of the deal and has decided to share it with its staff, people familiar with the matter said. The bonus averages out to roughly $1.3 million for each of Juul’s roughly 1,500 employees. How much employees get depends on how long they’ve been with the company and the amount of stock in the company they own.
Some are already criticizing the deal. Tobacco giant Altria is the maker of Marlboro cigarettes and Virginia Slims. Juul says its mission is to help smokers ditch traditional cigarettes.
Juul CEO Kevin Burns said in a statement, “We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the US. We were skeptical as well. But over the course of the last several months we were convinced by actions, not words, that in fact this partnership could help accelerate our success switching adult smokers.”