The regulatory crackdown on e-cigarettes has prompted Philip Morris International to call off talks about a $200 billion merger with Altria and sparked a shake-up at vaping company Juul, which sacked its chief executive and suspended US advertising.
Juul Labs, in which Altria took a 35 per cent stake in December 2018 for $12.8 billion, announced on Tuesday an abrupt change of leadership and alterations to its marketing and lobbying policies.
A person familiar with the situation said PMI decided to walk away after it became apparent the US government crackdown on vaping could have a negative impact given Altria’s stake in Juul.
André Calantzopoulos, PMI's chief executive, said the two companies had decided to focus on the US launch of Iqos, PMI's heated tobacco product, which, the companies noted, had been authorised by the US Food and Drug Administration following a "rigorous science-based review" and was not an e-vapour product.
Juul said Kevin Burns had decided to step down as chief executive. KC Crosthwaite, Altria's chief growth officer, will replace him. The company added it would suspend all its broadcast, print and digital product advertising in the US and refrain from lobbying the Trump administration on its moves to tighten regulation in the wake of an outbreak of vaping-related lung illnesses tied to several deaths.
Blacklash
The changes at Juul were intended to reassure PMI that Altria was in control of Juul and would have guided the start-up through the regulatory backlash, said a person informed about the negotiations.
PMI had been informed in advance of the moves, and the selection of an executive with greater tobacco industry experience coming from Altria was appreciated, the person added.
Up until late last week the two sides were determined to go ahead with a deal. Over the weekend, however, the board of PMI determined that the risks outweighed the benefits of a merger, said people close to the companies.
Both people said that PMI is likely to pursue a deal with Altria at a later stage once the regulatory environment settles. – Copyright The Financial Times Limited 2019
